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House | June 3, 2014 | Committee Room | Appropriations Education

Full MP3 Audio File

We’re going to call this meeting to order. Please take your seats. The sergeant at arms serving the committee this morning Young Bae, Martha Gadison, David Collins, and Carl Morello. Thank you gentlemen and madam. And the pages serving the committee this morning, if you would when I call your name just stand up and wave. Lauren Harden, Anya Honeycutt, William Johnston, Arjen ????, ??? McKay. Thank you all. This morning we’re going to give a brief overview of the governor’s budget and the senate budget, just for informational purposes only. We’ll start off by staff giving the presentation. I’m sorry the first person to present this morning is Pam Kilpatrick, thank you Ms. Kilpatrick. [SPEAKER CHANGE] Good morning to the committee members, members of the Chairs. Pam Kilpatrick, office of state budget and management. It is a privilege to be here before the committee this morning, thank you for having me. I’ve been given fifteen minutes to give you an overview of Governor McCrory’s recommended changes to the budget for the department of health and human services for the fiscal year beginning July 1, 2014, and my team is going to hold up numbers so I don’t overstay my welcome so there’s plenty of time for questions. The first slide in the PowerPoint handout is the total budget for the department of health and human services. Total requirements is total spending, of course receipts is federal, grants and other sources of receipts to the agency, and then total general fund appropriations. On the far left we have what was actually spent in total dollars, receipts, and appropriations last year. The current year certified budget, the budget that’s already enacted for July 1, 2014, and then a summary of the total changes that are recommended in this budget. The net change to state general fund appropriation is $122,592,860, for the revised recommended budget that you see on the right hand side of 18.8 billion, 13.8 billion from receipts and just over five billion dollars from state general fund appropriations. So in total the budget allows for some measure of growth, increases receipts, and creates a net savings of general fund appropriations. The budget for health and human services is enacted in multiple, discrete appropriations, not the lump sum of five billion dollars so what this slide does is present each of the eleven discrete appropriations of general fund money to the HSS by the subdivisions of the department so we start with the current enacted general fund budget. Net change, which is of course the sum of all the pluses and minuses that are being recommended to the general assembly and then again that revised total appropriation of just over five billion dollars. We do point out it’s a slightly different presentation from previous years. The amount of state appropriation that is required to fund the governor’s recommended salary increase is presented by each of the different divisions of the department so if you look at every division they total up to six million dollars..

. . . the state share only in as matched with federal funds. So, in the governor’s recommended budget, there are savings: $42 million in refinancing of existing programs without reducing services. $22 million in federal block grants and lottery proceeds are recommended to fund NC PreK. $13 million in federal block grants for subsidized child care and to move the regulatory staff of the Division of child Development on to federal receipts. $3.8 million recommended in the Governor’s budget as a savings in General Fund dollars for the ADAP program without changing either the eligibility for the program or creating a waiting list. There’s $75 million recommended in this budget from additional provider assessments. A portion of that is a new LME-MCO assessment that is recommended as the department is working through the details of that and exploring how that might be implemented. They are also speaking with Federal CMS. They have run into some issues and are working through that potentially for a revised recommendation around either how to achieve savings through an assessment or an alternative means. And then, $15 million is recommended in the Governor’s budget by increasing the state’s retention of the existing assessment program that the hospitals voluntarily participate in. There are $28 million in efficiencies and updated budget estimates such as a revised outlook for Health Choice, State/County Special Assistance where the state and counties will benefit in a reduction in the cost of that program equally, and then other various administrative savings. I think all total in the Governor’s recommended budget, there are 47 different items that are itemized in the books that you have before you. The Governor’s budget does propose to this body to make investments in Health and Human Services. The $6 million we referenced previously for the pay increase, additional state money to enhance oversight of and the safety, well being, and permanency of children throughout the state with a $2.7 million expansion item for oversight of child welfare. $5 million for foster care. There is growth in the case loads in foster care. This would fund their care and keep. $3.6 million from the lottery to serve additional at-risk four-year-olds. $10.7 million savings from within the mental health budget that would be redirected within the mental health budget to shore up the financial footing of the state’s in-patient state operated facilities $6.1 million identified in federal funds, block grants in particular, to expand community-based mental health services, crisis services, and fund a new initiative that Governor McCrory is proposing around service to the public through the office of Chief Medical Examiner. $300,000, roughly, to the Vital Records Agency. And then after the Governor’s Budget Book had been published, there was identified savings from within the State Health Plan, so by special provision the Governor makes a recommendation to add an additional $1 million for investment in the Medical Examiner System in order to do state-wide training, to develop a program for state-wide training, and to update the information technology capacity of the agency to do better data collection, date analytics. There’s also $1 million recommended in the Governor’s budget to get started with Medicaid reform. All total, the General Fund increases proposed in the Governor’s budget for the items are $23 million. Plus, we mentioned the $1 million by special provision savings from the State Health Plan for the medical examiner, and then the net, again, of the reductions on the previous slide. The expansions here produce the $122 million dollar in State General Fund appropriations. We mentioned 11 discrete appropriations to the HHS. The two largest. . .

To mental health and to Medicaid. Combined, the state appropriations to these programs represent 86% of the $5 billion that is invested in health and human services. Specifically on mental health the governor’s budget, while we identified efficiencies, does not recommend making any net reduction in the mental health budget. There was $10.7 million identified in savings that was the elimination of vacant positions and operating funds in the mental health central administrating unit. $450,000 lower than currently budgeted claims processing for mental health claims, saving 2.4 million state dollars. Lower administrative cost with the consolidation of LME MCOs for a savings of 1.8 and then elimination of the school level funding that has resided within the mental health budget as a potential for LME MCO risk reserve adding those together the governor proposes taking the $10.7 million and shoring up the budget gaps that have been chronically a part of the state mental health system. Essentially it’s a combination of spending beyond the enacted budget and collecting the receipts below the budget for a combination of those entities exceeding the certified budget. In the current year the shortfall for mental health is $16.3 million, that is the current estimate from the HSS. This of course is in addition to liabilities from prior years that they continue to pay down but the recurring amount in the current year is $16.3 million. We identified the 10.7 to start bridging that gap and in addition the agency is implementing various measures including group purchasing, use of generic medications, and automated time keeping in addition to other measures to continue to bridge that gap and again in addition the governor is recommending block grants be used to fund expansion of crisis services and substance abuse prevention and treatment. For Medicaid this slide presents the current year enacted budget for Medicaid. In bold in the center of this there is the budget that is already in place or enacted for the year that begins July 1st and then the bottom line of that blue shaded chart is to show you the growth that’s built in to the second year of the budget over the current year already in what is enacted so there’s an additional $405 million growth in total requirements, the receipts share in the middle at $258.9 million, and then net growth in state appropriations of just over $146 million. Since 2012-13 when we had the enacted budget the state general fund investment in Medicaid has growth by $506 million. The next slide is a busy little chart but what it’s designed to do is show you how we get the Medicaid budget to begin with. What we do is we start with a baseline budget that’s at the top of this in bold and shaded. The beginning base budget for the year we’re in, 2013-14, and for the year that this body is deliberating a funding plan for. What we do is we itemize from the money report all of the increases that were enacted into law for the rebase cost settlements contracting, the woodworking effect of the Affordable Care Act, the movement of health choice children, ???, and a CC and C study. What follows that are the savings initiatives that are directed in law to be accomplished by the Medicaid agency and those are all itemized, I won’t read each one but for the year that’s under proposal, 2014-15, there was $744 million worth of growth in state funding, $221.6 million in savings initiatives, and a net change of..

So with the pluses, with the minuses that ties back to show you how we start this year with increased availability over the prior year of $146 million. With that as a baseline the governor has recommended restoring funding for shared savings that is anticipated to be unachieved. The governor has recommended $50 million risk reserve for Medicaid and the risk reserve is essentially the difference between estimating, at the time we did it, of a 3.9% growth next year over the current year which produced a negative rebase, 5.7% growth which produced a positive rebase so the negative $40 million, the positive $10 million, the spread was $50 million. The governor recommended placing that is a nonrecurring reserve. In addition to the increase in funding, the budget proposes that any backlog of claims or costs from the current year that is incurred but not billed and reported to the Medicaid agency would be funded from carry forward of cash on hand at June 30th. The estimate at the time the budget was developed was $70 million for a potential backlog. In addition to that the governor’s budget, we do note is not specific to Medicaid but leaves $100 million unappropriated on the bottom line. For the current year in the absence of the data that we would normally use for Medicaid rebasing, we’re estimating, and the estimate is based on March 2014 data actual and then doing an estimate for the final quarter of the year. We assumed a budget shortfall of $200 million, again net of positives and negatives and the state share of that is $70 million. We assumed no impact into the new year from the current year shortfall, again because we proposed the carry forward. Final note there seems to be a difference from year to year in how federal drug rebate is accounted for. Just to provide assurance that based on consultation with the state controller and with the state auditor, the governor proposes that all of the receipts that are earned after the last check write in June from federal drug rebate will not be used to balance the current year budget but will be carried forward into the new year so that we can satisfy the repayment to the federal government, thus reducing the impact on the new year’s budget from any prior year drug rebate impacts. For ’14-’15 we used the current year as a base. We assumed our shortfall of $205 million, or $70 million state share, we annualized for those items that you saw in the previous slide for fully implementing expansions and savings measures. We assumed all of the children that moved from health choice to Medicaid were continued. We know that the budget anticipated a smaller number, we assumed the actual number that moved. We also expect a lower than was anticipated at the time the budget was developed impact from woodworking of the affordable care. We adjusted for the appropriate F map based on each category of expenditure. So in conclusion with the 2014-15 enacted budget as our starting point where we thought we’d be this time last year, our forecast for next year, we essentially found that that was a reasonable starting point. The governor did recommend by agency the increase in the state funding for the salary increase, restoring the components of shared savings that the department has deemed to be unachievable, funded $1 million for Medicaid reform, and then offered the savings and refinancing measures that you see above for a net change in Medicaid state appropriations of 74.4 million, and then separately funded a $50 million risk reserve. To the Chairs that concludes my prepared remarks, I’m happy to take questions. [SPEAKER CHANGE] Thank you Ms. Kilpatrick. We’ll actually hear from the staff on the Senate budget and then we’ll take questions. Thank you. [SPEAKER CHANGE] I’ll now turn it over to the staff to start their presentation on the Senate budget. [SPEAKER CHANGE] This is Deborah Langley with fiscal research division and we’re going to start in the Senate budget on page G1 with division of central management and support. We’ve been asked to hit major items in the Senate budget so we will not be going each and every item in the Senate budget..

Point out on page G1 um item 3 is contracts and vacant positions department wide. This is a 16 million dollar cut to the department that is flexible and can be achieved by reducing vacant positions in any contract. Previous years it had been nonprofit contracts, this doesn’t limit it to nonprofit it can be any contract. If you’ll turn over to page um G5 in the division of child development early education items 12 and 14 swap out block grant funds for state appropriation so there’s no cut to services it is a uh swap out. On pages G6 and 7 items 15, 16, 17 and 18 work together um item 15 childcare subsidy eligibility changes eligibility for child care subsidy from 75 percent of the state median income to 200 percent of poverty for children ages 0 – 5 and any special needs child and for children aged 6 – 12 to 133 percent of poverty. Any child currently that is served without regard to income. Like children with child protective services or child welfare will continue to be served without regard to income. Um item 16 changes the copayments um right now copayments are set at 8 9 or 10 percent depending on the size of your family. This sets all copayments are 10 percent. Item 17 childcare subsidy copayment no longer prorated for part time care, um just eliminate the proration of the copayment for children that are receiving childcare subsidy on a part time basis, for care that is part time. The savings from those items are reinvested on item 18 for the childcare subsidy waiting list and um an estimated 3200 children would be removed, there’s additional savings in item 15 that aren’t budgeted that also um removed children from the waiting list so that the total number of children removed from the waiting list is estimated to be 5500. Item 19 is Pre K expansion and provides 1000 additional slots for Pre K If you’ll turn over to page 8 um actually we’ll go to page 9, items 24, 25, 26, 27 and 28 are all around child protective services. Change speakers Mrs. Landry hold on for just a second I see the members of the committee furiously trying to keep up can you slow down just a little? Change speakers Sorry I will I’m sorry Change speakers Thank you Item 24 is child protective services caseloads um this is actually funding to give back to give to the counties to reduce child protective services investigative case loads. The case load is recommended to be 10 cases per worker and right now the data we have is as many 40 counties are well over that um limit. Item 25 is to enhance oversight of child county welfare services offices. This provides the division of social services 9 additional positions to um monitor, provide technical assistance and train counties regarding child welfare services. Item 26 is child welfare in home services expansion. This provides 4.5 million for in home services which are used to maintain the safety of children while helping the parent or caretaker learn more effective parenting practices. Item 27 is a child protective services state wide evaluation and it provides funding to um access performance, case load sizes, admin structure, funding, and worker turnover and um the report will provide recommendations in each of these areas. Item 28 is a protective services pilot program. It is to encourage the sharing of information among agencies. To improve the protection and outcomes for vulnerable children. It includes support system county DSS’s, Guardian Ad Litem programs among others. Um the senate also does the cost care assistance payment increase that the governor did which is on which is line item 29 and then um Denise Thomas will continue. [Change speakers] Denise Thomas fiscal research division I’m going to review the highlights of the division of public health and mental health. Public health starts on page G11 and the first item is item 31 which budgets um from increased receipts to the um age drug assistance program called aid app. It is expected that there will be about 5.8 million in hire receipts that we will receive this year from pharmaceutical rebates and federal grant that will not be spent and be carried over into that next fiscal year. So there is a onetime reduction of 5.8 million dollars for that. Going over to page G12 [end]

Item 35 is the School Nurse Funding Initiative. This is a reduction – a recurring reduction of about 3.5 million dollars – to the School Nurse Funding Initiative. It will reduce about 30 percent of the funding that is provided to the LEAs for school nurse positions, and that’s equivalent to 70 school nurse positions. The budget will also reallocate the remaining 166 positions that are funded by this fund to the 41 tier one counties only. The next item that I’d like to call to your attention is item 39, which you heard from Ms. Kilpatrick. The Senate did fund the Governor’s request for a million dollars expansion to address some of the operational deficiencies that you have probably heard about in the media related to the office of the Chief Medical Examiner. Going over to page G14, that’s the start of the mental health section of the budget. Item 42 is taking back about 17 million dollars non-recurring that you had provided last year to purchase equipment, furniture and I.T. infrastructure for the new Broughton Hospital, which was originally supposed to be opening in December 2014. Due to some construction delays, the hospital will not be opening and taking in patients until May 2016, and so the Senate has taken back that reserve and that will be reconsidered during the long session. Item 46 is a 6.1 million dollar reduction. It eliminates the funds that had been held in reserve by the department for the LMEs, MCOs, just in case one of them failed and there needed to be funds to pay liabilities to providers and other liabilities. Ms. Kilpatrick mentioned that this was part of the Governor’s item in which the Governor intended to transfer these funds to address operational deficiencies in the state-operated facilities. The Senate has decided instead to take this reduction and during the interim to hear more from the department about the operational deficiencies at the facilities and to address that during the long session. Item 47, the Senate eliminates funding for the Wright School. Effective July 1st 2014, the school would close. And Mr. Chair, Steve Owen will now talk about Health Choice and Medicaid. [SPEAKER CHANGES] Beginning on page G18, in addition to the items in the Governor’s budget, items 54 and 55 deal with eligibility. The first side, MD links the automatic Medicaid eligibility for those individuals that have special assistants. The second item relates to medically-needy individuals. The next item, 57, is a freeze of the case mix index adjustment that nursing homes receive. On page G20, item 59, this implements a retention percentage of 28.85 percent on the UNC and ECU physician UPL supplemental payment plan. Item 61 reduces the hospital payments for outpatient services for UNC and ECU to 70 percent of cost. Item 62 is a 2 percent rate reduction for those services that are paid for on a fee-for-service basis. Item 63 implements a single statewide base rate for inpatient hospital services based on the statewide median. Item 65 on page G21 is the Medicaid rebase of 206 million dollars. Item 66 on page G22 is the liabilities from state fiscal year 2014 of 143.8 million that will be paid in 2015. Item 68 is funding for non-recurring funding for Medicaid reorganization. And I’ll ask at this point, Mr. Chair, Joyce Jones to cover the special provisions. [SPEAKER CHANGES] Good morning. We’ll first begin with the division of central management. [SPEAKER CHANGES] Could you tell us the page please? [SPEAKER CHANGES] Page 74. And the provision is 12a.2. On page 74, funds for statewide…

Health information exchange. Subsection A states the general assembly’s intent to maximize receipt of federal funds for the statewide health information exchange. With a nonprofit entity known as NCHIE leading these efforts for the 14 15 fiscal year in hopes of receiving a sufficient amount of federal matching funds to eliminate or reduce the participation fee currently being imposed on hospitals that are required to connect to the HIE network. Beginning with the 15 16 fiscal year, it is the general assembly’s intent for the department to assume primary responsibility for drawing down these federal funds. Subsection B of this provision requires the Division of Central Management to allocate a sufficient amount of appropriated funds to the nonprofit entity to represent the state’s share for maximum amount of accrued federal matching funds for allowable Medicaid administrative costs related to the HIE network. [SPEAKER CHANGES] Good morning. Lisa Wilkes with bill drafting, and I’ll be covering just highlighting a few provisions under the Division of Child Development and Early Education, as well as the Division of Social Services. On page 75, this is your child care subsidy rates and eligibility provision that Deborah mentioned. This follows the money. Just wanted to bring it to your attention. Also, if you will note subsection B1, this is new language and beginning January 1 2015, it requires the Division of Child Development and Early Education to revise its subsidy policy to include in the policy’s definition of income unit a step parent, a step parent’s child, and non-parent relative caretaker or the caretaker’s spouse or child, when the parent of the child receiving subsidy is not in the home. I think that’s it for the Division of Child Development. Moving on to the Division of Social Services. If you’ll turn to page 77, this is the child protective services improvement initiative. Again, Deborah Landry spoke of this provision. This follows the money and just to highlight again one provision. One in particular subsection and that provision. Subsection G requires the Division of Social Services to study conflicts of interest regarding public guardianships and child protective services. This was recommendation from the HHS oversight. And it lists out the criteria to address and conducted in the study, and it requires a report to the Senate and House HHS Appropriations Committees and the fiscal research division by February 1, 2015. Moving on to provision 12C.3 and this is on page 79 and 80 of your budget bill, is the Eastern Band of Cherokee Indians provision. And under subsection A, which is the purpose of the provision which is to enable the Eastern Band of the Cherokee Tribe to assume responsibility of certain human services. Under subsection B, beginning October 1, 2014 it provides that the tribe would begin assuming responsibilities for the supplemental nutrition assistance program, and in doing so state laws relating to the provision of SNAP services by county DSS for members of the tribe shall not apply to the tribe, and responsibilities relating to SNAP are delegated to the tribe. Likewise, by October 1, 2014 except for services relating to special assistance, child care and adult care homes, it provides that the Eastern Band of Cherokee Indians assume responsibility for other programs of public assistance and in doing so again, the state laws relating to the provision of those other services by the county DSS for members of the tribe shall not apply to the tribe and the responsibilities relating to those programs are delegated to the tribe. Under subsection C, this revises GS108A-25 to add a new subsection to require that once a federally recognized tribe assumes responsibilities of certain human services programs previously performed by the county, the county is no longer legally responsible for those services. Subsection D revises

GS108a-87b regarding the allocations of non-federal shares and requires that when the tribe assumes the responsibility the non-federal matching funds designated to Jackson and Swain Counties for serving the tribe that were previously responsibility of the state are to be directly allocated to the tribe and that any portion of non-federal matching funds that were previously borne by the county for public assistance and social services are the responsibility of the tribe. And I’ll turn it over to Jennifer Hillman to speak to the last subsection. [SPEAKER CHANGE] Jennifer Hillman, research division. Section E of this section directs the department to submit a state plan amendment to effectuate the changes required by this section and also directs the department to seek a waiver to address the health care needs identified in community health assessments and plans conducted by the tribe provided that those changes are for services that will be 100% federally funded. [SPEAKER CHANGE] Moving on now to the division of aging and adult services would you please turn to page 80 of your bill? There’s one main provision I’d like to highlight on page 80, 12d.1 eligibility for state county special assistance. This special provision sets income eligibility for the special assistance program at 100% of the federal poverty level effective November 1, 2014. It also eliminates a provision that allows non-residents to qualify for special assistance after spending 180 days for a North Carolina resident who is a close relative, and it narrows situations under which a person receiving treatment at a state facility, pursuant to a mental health compact, can qualify for special assistance, and that is only when the compact requires the state to continue treating the person within the state. Subsection B grandfathers eligibility for all special assistance applicants who were approved to receive special assistance prior to the November 1, 2014 start date. Moving on to the division of public health on page 83 of your bill. Section 12e.1 is the provision regarding the children’s developmental services agencies. It requires the department to close four of the state operated CDSAs by January 1, 2015 with a report to the HSS oversight committee identifying those CDSAs selected for closure and the report is due on March 1 of ’15. Subsection B of that provision requires the department to maintain the same eligibility requirements for the CDSA program as existed on June 30, 2013. The next provision that I’ll call to your attention is on that same page, it starts toward the bottom, 12e.2 redirection of school nurse funding initiative to tier 1 counties. This follows the money and Denise Thomas spoke about this when she went over the money allocation for this. For the fiscal year ’14-’15, SNIFFY funds are redirected to local health departments located in tier 1 counties only. This provision maintains for those counties the current requirements that are attached to receipt of these funds. Subsection B maintains for the tier 1 counties the current prohibition that disallows school nurses to perform certain instructional and administrative duties. Moving on to the division of mental health, developmental disabilities, and substance abuse services on page 88 this is the provision regarding closure of the Wright school. Subsection A prohibits any new admissions or re-admissions to the school after July 1 of 2014 and requires the department to develop a plan in consultation with the LME MCOs for transitioning all student for appropriate educational and treatment settings and it requires the department to cease school operations effective September 30 ’14. Going on to the division of health service regulation on page 90, 12g.2 these are revisions to the health care cost reduction and transparency act. I will just call to your attention within here there are some clarifying language regarding the definition of health insurer and also clarification regarding the information to be reported by the five largest health..

?? And that concludes my comments. [SPEAKER CHANGES] Ryan Blackledge, with legislative drafting. I’m going to cover just a few things within Medicaid. Medicaid starts on page 93 of the third edition of the bill. Page 93. And I’m going to start with the first provision, which begins on line 30. And that’s the Medicaid reorganization to work towards reform. I’m sure you all have seen this one in the newspapers. The main points here is that there is a new entity to be created, that’s going to be managed by a board, that will run Medicaid and NC Health Choice. And a direction is set to move towards full risk provider led and non-provider led capitated health plans. And the main goal of this reform is to provide budget predictability for the state. Next if you would turn to page 97. Page 97, beginning on line 6, there’s section 12H.10C. I just want to point out this is a study of the personal care services. That’s an area within Medicaid which pretty much every year runs over what the expected budget is. The federal government has recently announced some new options so this is a study, and there’s funding for this study, to try to see if there are some other options for the state to provide services. And then if you turn to page 103, I’d just like to point out there are a series of changes that deal with appeals and overpayment processes. Those begin actually at the very bottom of page 102 and run for several pages. I can answer any detailed questions about those if you like, but I just wanted to point those out because there weren’t any money items attached to those. Mr. Chair, that’s all I’ve got on Medicaid. [SPEAKER CHANGES] Mr. Chair, that concludes our comments about the bill. [SPEAKER CHANGES] Okay. Thank you. Members of the committee, it’s now time to voice any concerns over the governors or the senate budget. Concerns, questions to the staff, or any other comments? Representative Martin. [SPEAKER CHANGES] Thank you, Mr. Chair. I’ve got a lot of feedback on the school nurse initiative, and I was wondering if maybe some of the staff could explain some of the research and thinking that went into that, and what the plans are going forward, for what was being provided? [SPEAKER CHANGES] Someone from staff want to take that? [SPEAKER CHANGES] Could we go on to the next question until Denise Thomas is available, she covers that area for fiscal research? [SPEAKER CHANGES] Okay. Representative Martin, did you have any other comments at this point? We can come back to you if you want. Okay. Representative Avila. Did you have a question? I’m sorry. Representative Insko, my apologies. [SPEAKER CHANGES] Thank you, Mr. Chairman. In the money report on page G23, item 70 single base rates for hospitals. Can someone explain how that fits with the state keeping 15 million dollars of the assessment and whether there are any hospitals that will actually gain money as a result of this, especially the rural hospitals? And I’m not sure who could. [SPEAKER CHANGES] Steve Owen. The way basically what this provision or this item does is it uses the state wide median rate and uses that as a standard rate for all in patient hospital services. When you run this through, because hospital reimbursement is complicated because you have three pieces. You have claims, you have the disproportionate share hospital plan, you have the GAP plan. At the end of the day, actually, there will be no hospitals that gain in this process. There will be some that have a larger loss because in essence what will happen is you’ll see the claims piece go up for some hospitals and go down for others. But then at the end of the day, hospitals are all paid on an inpatient basis. They get Medicaid rates. They fund that increase through the GAP plan, so you’ll see assessments changing. You’ll see dish plan allocations changing. So basically all hospitals will see a reduction as a result.

Some larger than others, mostly the urban hospitals see the largest reduction. [SPEAKER CHANGE] Okay thank you. I guess my concern is that we’re really straining our rural hospitals so even though they receive less of a reduction I think we need to pay attention to that issue. [SPEAKER CHANGE] Representative Fulghum. [SPEAKER CHANGE] Thank you Mr. Chairman. I had to ask earlier fiscal research staff to score if they could in a fiscal note the house version of this Medicaid reform situation, I think it’s 1181, and I was wondering if this particular provision in the senate regarding a new entity had been scored from a fiscal standpoint in any way, shape, or form or is it so amorphous that it defies that? [SPEAKER CHANGE] At this point the reorganization is really the cost to fund for consultants, contractors, initial staff to create a new entity so there is no scoring in terms of savings or actually reforming of Medicaid under that scenario. [SPEAKER CHANGE] Follow up Mr. Chairman. One other unrelated question about traumatic brain injury. Is this budget item on page 88 with 2.373 million, is that a new non-recurrent or recurrent item? How was that budgeted in the past years or is this something new? And an additional comment while you’re thinking about that, there’s a provision later in the document regarding a brain injury studies commission that will define in lots of ways where this actually belongs instead of developmental disabilities which is not, but I just wondered if this particular budget item is a dramatic increase or the same? I just couldn’t follow the last few years of the budget. [SPEAKER CHANGE] Could you tell me what page this is on? It’s page 88? [SPEAKER CHANGE] It’s page 88, item 12f.1. [SPEAKER CHANGE] Representative Fulghum this is not an increase in the appropriation. This is an attempt to maintain the identity of the funds that are already appropriated in the budget for traumatic brain injury and just to ensure that they did not lose their identity and get folded into the single stream funding and just allocated just as part of single streamed funding to all of the LME MCOs. This is money that is currently in the budget specifically for persons with traumatic brain injury and this just delineates those three separate pots, one of them is for the contracts with the TBI association of North Carolina and then there is close to 800,000 that is currently used for residential programs, and then there is another $1.2 million that is allocated to individual LME MCOs to use for specific services for persons with TBI. So it was just an attempt to maintain an identity of those funds and not have them just get folded into the single stream funding and lose their use for that specific purpose. [SPEAKER CHANGE] Thank you. One follow up. On page 80 in regards to the special assistance program, is this the item that involves certain individuals no longer being eligible for aged, blind, and disabled? I couldn’t quite follow that particular language, but is that the item that we’re talking about? Aged, blind, and disabled, adult care homes. How many individuals would no longer be eligible is what I’m asking? [SPEAKER CHANGE] Based on the most recent information there’d be about 5,200 individuals that would no longer be eligible for Medicaid enrollment. [SPEAKER CHANGE] And are they eligible under additional provisions? Federal provisions? [SPEAKER CHANGE] No, basically what this does is de-link the automatic eligibility so they would have to qualify individually so they’d have to be at or below 100% of the federal poverty level. Right now the estimated number of individuals is 5,200 people that are above 100% of the federal poverty level that would not qualify prospectively. [SPEAKER CHANGE] Thank you Mr. Chairman. [SPEAKER CHANGE] And I do just want to clarify..

That the item on page 80 just relates to eligibility for the essay program but there’s a separate provision that deals with de-linking essay from Medicaid. [SPEAKER CHANGE] Mr. Chair if I may, just to be clear that provision is on page 94. [SPEAKER CHANGE] Could I have a follow up to that specific issue? [SPEAKER CHANGE] Okay, Representative Insko. [SPEAKER CHANGE] I understand without this state county special assistance that there will be an impact on people who are qualified to be in adult care homes. Is that one of the big impacts of this? Or is that a different issue? [SPEAKER CHANGE] Representative Insko the provision on page 80 does change eligibility for the state county special assistance program payments and right now the program has three different eligibility levels. If you’re in home it’s 100% of poverty, if you’re in a regular adult care home it equates to about 126% of poverty, and if you’re in a special care unit it equates to about 160% of poverty. This takes all three of them to 100% of poverty. The Senate’s provision grandfather in those people that are currently receiving so there will no one that’s currently receiving that loses eligibility, but beginning November 1 everybody’s eligibility for the payment part of special assistance will be at 100% of poverty. Their payments would still be differentiated based on where they’re living but the eligibility would be 100% of poverty and that’s a separate issue from the Medicaid issue where they’re being de-linked from Medicaid. [SPEAKER CHANGE] My concern has to do with the comments that were made that these people who will no longer be eligible for this service would be able to buy insurance on the exchange. It just seems to me like insurance on the exchange doesn’t cover the same services that are provided to this population in an adult care home. [SPEAKER CHANGE] I think the comment was made relative to those that are above 100% of the federal poverty level would qualify for tax subsidies. Clearly the insurance policies they would purchase would be based on the benefits that are based on the exchange policies. [SPEAKER CHANGE] Mr. Chair, just a point on that. I think one of the points that was made on that was the medically needy category. Medically needy are those who have to spend so much on their medical costs that they get down to a particular level of the federal poverty level and thus they qualify for Medicaid. Medicaid coverage is removed for them within the Senate budget and I believe the publically stated reason for why that could be done is because they would be able to purchase on the exchange and then having health insurance, because that’s now a requirement they would have to purchase. You are correct however that the benefits on those plans are not as generous as what’s given under Medicaid. [SPEAKER CHANGE] So I make sure I understand, when you go into an adult care home or you’re receiving services in your own home it covers personal care services and those services are the ones that are essential for keeping a person wherever they are I guess, providing services that they can’t provide for themselves, and I’m concerned that a health insurance policy wouldn’t pay for those services and that’s why people are getting home health or they’re in an adult care home because they need those personal care services. Maybe I just need to have somebody say that the health insurance plans that they get on the exchange that they do cover personal care services. [SPEAKER CHANGE] To my knowledge, health insurance plans generally do not cover such personal care services, there may be some exceptions that are out there but generally speaking they do not. [SPEAKER CHANGE] So it just seems like we’re leading this group of people that have some specific needs without any resolution, but we can talk about that later. [SPEAKER CHANGE] Representative Martin. And staff I remind you to identify yourself for the record each time. Thank you, Representative Martin. [SPEAKER CHANGE] Thank you Mr. Chair. I have a question on the money report. On page G20 the provisions that affect ECU and UNC where they’re treated differently than other hospitals now and that that additional funding supports the medical training and I see this as a big concern as we look at the shortages going forward of physicians and that we really do need to be training people, given the health care reform arena..

Are there any offsetting additions in the education budget to focus on, are we pulling out that additional cost of medical training and seeing it show up anywhere else in the budget, which might fall under education or is this just really impacting medical education? [SPEAKER CHANGE] To my knowledge there are no offsetting items in education for these items. [SPEAKER CHANGE] Follow up. And is that correct that those are items that have to do with the cost of the medical training of why they are separate and why they’ve been treated different for UNC and ECU, is that accurate information you think? [SPEAKER CHANGE] Steve Owen, fiscal research. Historically I think the reason that they were treated separately did deal with the medical education. What this does, there are two separate items. The first one is an actual reduction that both of the facilities would realize in terms of the implementation ??? on the UPL payments that are made for the physician side. The hospital outpatient cost you have to take into consideration how the dish plan works and really what this would do is a lot of this really gets shifted to the pilot hospitals while it shows up here as a reduction for UNC and ECU. Ultimately what happens is it takes dish funds out of the fund or the allocation earlier so that there’s less left over for the private hospitals that then increases their deficit which then requires those hospitals to actually make a contribution to the gap plan to offset that. [SPEAKER CHANGE] Representative Martin did you have a question earlier for Ms. Thomas? [SPEAKER CHANGE] Yes thank you. I was interested in the school nurse provisions, I’ve gotten a lot of feedback on that and if there could just be a little bit more explanation on what the thinking is there and why the cuts, that I think are consistent in both the governor and senate’s budget on reducing the school nurse? [SPEAKER CHANGE] Denise Thomas, fiscal research. Representative Martin the thinking there was that several years ago the budget directed fiscal research to do a study of the school nurse funding in both DPI and in public health and if the allocations were correct that the funding was enough and some other issues related to that. Basically the findings of that study, which was not published, but the findings were basically that the state is so far below the nationally recommended standards of the number of school nurses that should be deployed in the schools around the state. That standard is at least one school nurse position for every 750 or fewer students, and based on that formula the state would really need to have something like 2,500 school nurses and currently from all funding sources there’s only about 950 school nurses so this was an agency recommendation that did go up to the governor’s office and it did not come over in the governor’s budget, but the senate in considering the agency reductions just felt that due to the fact that you didn’t have enough throughout the state anyway that they could take the cut and accept the recommendation to do the reduction but then target the remaining funds to those tier 1 counties, the counties that have the greatest need and the children who are the highest risk so you could at least meet those national standards in those 41 counties. [SPEAKER CHANGE] Follow up? [SPEAKER CHANGE] So just to clarify, we’re saying that we are way below what is nationally recommend and then are moving forward with a cut but just allocating what little bit we have left to the highest needs but we’re not getting closer to where we need to be? [SPEAKER CHANGE] Denise Thomas, yes that’s correct Representative Martin. [SPEAKER CHANGE] Thank you. [SPEAKER CHANGE] Representative Earle. [SPEAKER CHANGE] Thank you. I don’t know who this should be directed to, but in the governor’s budget there was mention of Medicaid reform and of course in our oversight committee we’ve been talking about Medicaid reform, and what I’ve been hearing is that the Senate has been talking about Medicaid reform. Are we all talking about the same Medicaid reform, and if not where is it in the Senate’s budget that they lay out what they are proposing..

Because I think I’m understanding that it might be drastically different. [SPEAKER CHANGE] Mr. Chair, Ryan Black, legislative drafting. To make the drastic difference very clear I’d like to you to turn to page 94. Page 94, lines 14-16 it says the department of health and human services shall cease any activities related to implementing Medicaid reform based on its proposed accountable care organization or ACO model. So the Senate provision very clearly says to the department, stop at this particular model and instead sets out a different direction which I discussed already on page 93, a full risk provider led and non-provider led capitated health plan model to be organized by a board outside the department of health and human services. [SPEAKER CHANGE] Follow up? [SPEAKER CHANGE] Okay, I’m sorry. The 12h1 that directs the department, that is directing the department to cease on the governor’s proposed Medicaid reform, am I understanding? [SPEAKER CHANGE] Ryan Black, legislative drafting. Yes Representative that is correct. [SPEAKER CHANGE] Okay and follow up. The million dollars that’s in the governor’s budget, did the Senate do something with that? Was it re-appropriated? [SPEAKER CHANGE] If you turn to page G22 there is item 68, again that’s G22, item 68. There’s $4.8 million that is going towards the reorganization. [SPEAKER CHANGE] One more. I can’t read quite that fast. With the new plan, is there a date and all set for when that is supposed to be presented and is it going to be presented to the legislature or? Can you just explain a little bit more about it because I can’t read that fast. [SPEAKER CHANGE] Again Ryan Black, legislative drafting. I think if you look at the language on 93 it’s more of a statement of direction. There are some specifics that are not there, such as what the board would look like, who would be on the board, what the timeline would be. I will note on your specific question on timeline though that would be one of the tasks for this new entity, this new board to determine. [SPEAKER CHANGE] One more, I’m sorry. And this board will have the authority to eliminate optional services? Is that one of the..? [SPEAKER CHANGE] Again Ryan Black, legislative drafting. That’s not explicitly included, but I would imagine if a board was given the authority to create a new plan and to have capitated health plans, that type of power would be included. [SPEAKER CHANGE] Representative Fulghum. [SPEAKER CHANGE] Thank you Mr. Chairman. Mr. Black it’s just the way I read that particular section in 12h.1 it says its proposal for ACO model doesn’t mean ACO model couldn’t be used, but it just references its, meaning the department’s model, is that correct? [SPEAKER CHANGE] Again, Ryan Black, legislative drafting. Yes sir that is correct. [SPEAKER CHANGE] Follow up Mr. Chairman. On page 98 this section 12h.1a on line 48 references a 3% payment cut that’s effective January 1, 2014 and then on the next page it goes on to talk about another 3% payment cut and I wonder if they are the same thing specifically and also it references physician payment cut excluding primary care until January 1, 2015 so in effect does that mean there’s a 3% payment cut for one year or are we talking about the previous paragraph which does not seem to have a time limit or even a specific service limit? I’m sort of stumbling through this language here. [SPEAKER CHANGE] Ryan Black, legislative drafting. Last year’s budget had a 3% rate withhold that was associated with the shared savings plan. Some of that 3% that was withheld was then intended to be paid back, not all of it, some of it was intended to be paid back to providers that have better outcomes. The department was tasked with developing the plan for what that would look like. What the Senate’s budget does..

We’re going to clarify that’s not a 3% withhold, that it just a rate reduction. It repeals the shared savings portion of this so there’s no shared savings plan, there’s no money being paid back, it just says that that’s a 3% rate reduction. Over on page 99 though that section 12h.14c what that does is modifies the existing provision in law so this is a provision from last year’s budget and that is the, if you look at lines 9-19, that’s the list of provider groups and services that were subject to the 3% rate reduction. What lines 12-15 does, by removing those, and this is effective January 1, 2015, it removes those. So by removing those from the list, that then gives them back their 3% which have been reduced prior. [SPEAKER CHANGE] Follow up. So the physician cut until January 1, 2015, is that just for this year? [SPEAKER CHANGE] Again, Ryan Black, legislative drafting. Just to clarify, the language excluding primary care until January 1, 2015 that was language that was in last year’s budget and it was included in last year’s budget because of requirements from the Affordable Care Act whereby reductions could not be made to the primary care rates so the primary care until January 1, 2015 in law last year and effective January 1, 2015 primary care will be included in the larger group of physicians they’re subject to that 3% rate cut. [SPEAKER CHANGE] And it’s not sunset on that particular date? [SPEAKER CHANGE] No sir that does not sunset. [SPEAKER CHANGE] Follow up Mr. Chairman. On page 100, study of physician assessment this seems to imply that the department studying the possibility of assessment on all physicians without regard to provider category in regards to Medicaid or Medicare, it says all licensed physicians in the state. [SPEAKER CHANGE] Ryan Black, legislative drafting. Yes sir that is correct. By way of background the federal government allows states to tax certain provider groups and then allows states to use that money to make Medicaid payments back to those groups, but there’s a listing of what those groups are and part of the requirements is that it has to apply to everyone within that group. So one of the groups is physicians, if there was an assessment it would be on all physicians, not just on physicians that see Medicaid patients. [SPEAKER CHANGE] Follow up Mr. Chairman. [SPEAKER CHANGE] Final follow up. [SPEAKER CHANGE] In the page 101 it mentions CC and C in regards to terminating without cause, contract 28023. Is that the general service contract the department has with CC and C and does that contemplate them not longer functioning for the department? [SPEAKER CHANGE] Ryan Black, legislative drafting. Yes sir that is the big contract with CC and C and if you look at other portion of that provision you can see that the department is not allowed to contract with CC and C and also given a directive not to renew the contract. The contract expires December 31, 2015, that subsection A in particular would give the new entity the authority to, basically agency on behalf of medical assistance to cancel that contract. There is a thirty day notice and cancellation without cause provision that’s in the contract right now. [SPEAKER CHANGE] Thank you Mr. Chairman. [SPEAKER CHANGE] Representative Insko. This will be the final question. The Education committee starts here at 10 o’clock, we need to leave the room. Representative Insko. [SPEAKER CHANGE] Okay thank you. I would like to make a couple of comments that are just like one sentence comments on some other items. On page 117 the Carolina Pregnancy Care Fellowship is receiving an increase in funding and I have some concerns that that agency does not have adequate medical professionals associated with it and I can get into that more later. On page G15 in the money report that closes Wright school again and I would just say that we actually need to be expanding that program across the state and establishing regional Wright schools because it’s a program that works. I do have some questions about child care subsidy and the number of children that will be..

So we have some swap outs and some changes in changing from a percent of average income to the federal poverty level and then we have some expansions. Can anybody give me the number of children, the total number when all that’s taken into consideration that will actually lose services? Based on the child care subsidy actually lose their eligibility for subsidy. [SPEAKER CHANGE] This is Deborah Langley with fiscal research. The information I have is based on the state fiscal year ’12-’13 and the number of children that received in that year. In that year there were 110,000 different children that received child care subsidy. The average monthly is 77,000 but over the year 110,000 different children receive. For ages 0-5 of those 110,000 there would be 2,100 that would not have received under the new eligibility standard. Of the 110,000 ages 6-12 just under 10,000 children would not have been eligible, and then the special needs children there would have been seven that would not have been eligible under the new eligibility requirements. The children off the waiting list that’s going to be served is 5,500 but that’s based on an average monthly so it’s hard to compare those two numbers because the numbers I just gave you that would not have been served from 0-5, 6-12 are just different children over the course of the year, not an average monthly number, and the 5,500 is an average monthly number. [SPEAKER CHANGE] Okay thank you Ms. Kilpatrick for your presentation and for your staff being here, and thank you to the committee staff and our current plan is to meet back here Thursday but watch your schedules and calendars. This meeting is adjourned, thank you.