Closer Look: NC Budget Appropriations Act of 2014 and Medicaid Reform

This article is the second of several wrapping up the 2014 legislative session. Look for more details on the budget and issues related to education in coming days. 

The NC General Assembly passes two-year budgets during its long sessions in odd calendar years. During the short sessions, like this year, they make adjustments to the budget for the coming year. The budget documents are in two parts: 1) the actual bill listing general funds appropriated to each department/area along with special provisions, policy changes that direct the use of the funds. 2) the “money report” or conference report that provides some detail about funds that were added or removed from each department’s budget. Links to the budget documents can be found in the left column at

ASNC continues to advocate for increased access to quality services and supports, including for those on waiting lists and those who do not have access to health insurance or services through their health insurance. The budget includes a provision requiring the state to develop 3,000 slots in a new intellectual and/or developmental disabilities “supports” waiver, but does not yet allocate funds as it will take some time for the waiver to be developed and approved. There are new funds for crisis stabilization services across disabilities, but overall no new funding for programs specific to people on the autism spectrum. The General Assembly is still considering an “i” option for a basic level of services to be developed, possibly to replace existing personal care services (outside of the Innovations waiver).

Health and Human Services Budget

  • Medicaid: The budget appropriates $136 million in non-recurring funds to address the current year Medicaid shortfall and cuts $75 million in recurring funds through rate and payment reductions as well as locating additional cost savings. The budget also establishes a Medicaid Contingency Fund with $187 million to help cover potential shortfalls in the Medicaid budget for the 2014-15 fiscal year as the result of increased costs or delays in getting changes to the state’s Medicaid program approved by the federal government.
  • Special Assistance: The budget revision decouples Special Assistance from Medicaid, meaning that individuals who qualify for the State County Special Assistance program are not automatically qualified for Medicaid. Special Assistance funding helps low-income elderly and disabled individuals pay for room and board in residential facilities including adult care homes/assisted living, family care homes, and group homes/supervised living. It also can help disabled individuals living at home to remain at home while receiving services rather than move to a facility. It is not yet clear how many people will lose eligibility, but it could be 3,000-5,000. The budget also drops Special Assistance eligibility to 100% of the poverty level (around $970 per month) beginning November 1, but grandfathers in current recipients at the previous level of 125% of poverty. This change will be the same across all settings, removing the previous institutional bias in the program, but allowing fewer people to qualify. Eligibility changes require a state plan amendment and approval from the federal government.
  • Child Development Services Agencies (CDSAs): The $10 million cut from the previous budget was retained, but the NC Department of Health and Human Services (NC DHHS) was given the flexibility to determine how cuts to the CDSAs will be implemented. It does not require them to close sites, but does continue the previous budget provision to eliminate 160 CDSA positions by next June. NC DHHS must submit a report to the Joint Legislative Oversight Committee on Health and Human Services identifying which actions they took to implement the cut. The General Assembly heard advocates’ concerns about the closure of CDSAs and did not require closure to meet the targeted cut.
  • Group Homes: The supplemental funding for group homes for people with intellectual and developmental disabilities (IDD) and people with mental illness was extended into this year to help support people living in group homes who lost access to Personal Care Services under Medicaid. $2 million in funds was shifted from unpaid Local Management Entity liabilities to support group-home residents. The special provision attached to other funding requires NC DHHS to submit a long-term plan by April 2015 for residents of group homes who are currently accessing this funding.
  • Crisis: New funds ($2.2 million) in the budget are intended to expand crisis stabilization services. While the services are not specific to individuals with IDD, developmental disabilities (DD) is mentioned along with mental health and SA. Most emphasis is on facility-based crisis and inpatient beds, especially for children and youth. ASNC continues to advocate for the use of these and other funds to expand crisis respite, access to START, and the development of crisis services specific to children and youth with IDD. ASNC continues to work with NC DHHS on understanding the needs of people with autism in crisis and the development of crisis services.
  • Waiver slots: No additional slots were funded, but the budget contains a requirement to design and draft a plan for creating 3,000 new supports waiver slots over a period of 3 years. Each slot would have a maximum budget of $20,000 per year and be intended to target individuals on the registry of unmet needs. ASNC will be working with NC DHHS on recommendations for the new waiver.

Budget Special Provisions

Every state budget has provisions that direct how funds should be used, recommend studies and pilot projects, and otherwise make policy changes. Included in the special provisions are:

  • Study Vocational Training: Section 10.4(a) authorizes the Joint Legislative Oversight Committee on Education to study issues related to vocational training for individuals with IDD, including model programs for training, developing vocational expertise, and job readiness; enhancing employment outcomes; barriers to employment; establishing partnerships between community colleges, universities, NC DHHS, Vocational Rehabilitation, and community organizations that offer job training; policies for ensuring students are prepared for higher education after high school; and policies for job training as students complete secondary school.
  • Study Guardianship System Improvement: Section 12D.3.(a) continues the work started by the Guardianship Study Committee by requiring NC DHHS, NC Department of Aging, and the NC Administrative Office of the Courts to develop a better way to evaluate publicly funded guardians to include face-to-face observation or interviews with the person under guardianship. It requires the development of a model plan to transition wards to alternative guardianship arrangements and also studying the use of care coordination to oversee conflicts of interest when paid providers serve as guardians.
  • Require Guardians to Submit Status Reports: Section 12D.4.(b) requires public guardians to submit a new version of the status report on the ward that includes reports on recent medical and dental exams; performance of the guardian’s duties; the ward’s residence, education, employment, rehabilitation, or habilitation; efforts to restore competency; efforts to seek alternatives to guardianship; efforts to identify alternatives to corporate guardianship; and recommendations for implementing more limited guardianship. The clerk of courts may also order any other guardian to file these status reports, though they are not required in the new stature.
  • Mental Health Medications Management: Section 12H.9 allows NC DHHS to implement new management techniques to reduce the cost of prescription medication to treat mental and behavioral health issues. Initially, NC DHHS must seek out additional rebates from pharmaceutical companies to achieve $12 million in “savings,” but then is allowed to achieve the savings through controls such as prior authorization, new utilization review methods, and “other restrictions.”
  • Personal Care Services Management: Section 12H.10 outlines new requirements to restrict the growth or Personal Care Services (PCS) under traditional Medicaid (not waiver services) including rate cuts, keeping spending at current levels, and planning for redesigning the program. Initially, the budget requires that NC DHHS cut the current rate retroactively to October 1, 2013, as well as implement new rate cuts. NC DHHS must present the legislature with a plan for keeping spending at current levels. Then it requires NC DHHS to retain a contractor to study issues related to redesigning PCS while still meeting the state’s obligations under the Americans with Disabilities Act and the Olmstead decision.
  • Medicaid County of Origin: Section 12H.35 requires NC DHHS to fix problems that come up when a person on Medicaid moves from one county to another. Between now and February 1, 2015, NC DHHS will work with stakeholders on a plan to ensure Medicaid services move with the individual and state laws and policies are changed to ensure the fix is permanent.

Medicaid Reform and Managed-Care Legislation Delayed

ASNC has been monitoring the progress of House Bill 1181, which would change the state’s Medicaid program to having provider-led health plans (accountable care organizations) and private managed-care plans (private MCOs) rather than the current program, which is a mix of state-run, fee-for-service and local government managed capitated for mental health, developmental disabilities, and addiction services (LME-MCOs). The Senate and House versions of the legislation for Medicaid reform differ significantly, and no agreement was made between the chambers before legislators left Raleigh. Senate and House adjournment resolutions both say that the General Assembly may return November 17 to take up the issue of Medicaid reform.

The Senate’s version would move the state Medicaid program to private managed care while allowing for some ACOs or provider-led health plans, which are the main focus of the House’s plan. In addition to having Medicaid services managed by private managed-care companies, the Senate would move Medicaid into a separate government agency run by a seven-member, appointed board. The House’s version would keep the current structure of developmental disabilities services managed by the public LME-MCO system, while the Senate would move all services, health and disability, into an integrated private managed-care model.

ASNC does not have a position on the current proposals for Medicaid reform; however, ASNC has stated previously that any change to managed care should include stakeholder involvement in planning, ensure transparency, retain/reinstate case management, and focus on good outcomes for individuals, including expanded services for the wait list, rather than just cutting costs. The Coalition, made up of advocates for mental health, developmental disabilities, and addictive disease services, of which ASNC is a member, has expressed concerns about the shift away from the current LME-MCO system to private managed care. Because the current LME-MCO system is already capitated and under managed care, developmental disability, mental health, and addiction services are not responsible for increases in Medicaid health-care costs.

NC Health News Report on H1181 Changes

If you have questions about public policy issues, please contact Jennifer Mahan, Director of Advocacy and Public Policy, at 919-865-5068 or


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