Budget Update

Due to the Memorial Day holiday last weekend (and lots going on at the legislature), this budget update is long overdue.  The Senate approved its version of the budget the week of May 20th.  The House then spent last week considering the Senate version and the changes desired by the House.  We expect to see the House budget considered in subcommittees this week and voted on by the full House by June 13th.  At that time, the budget will go back to the Senate to accept or reject.  As there are certain to be many changes, the Senate will surely reject (or not concur with) the House version.  A committee of House and Senate members will then be appointed to consider the differences between the two budgets.

Below is a summary of the Senate proposed budget.  The full bill is online here and the original Committee Report is here. Stay tuned for the House proposals in the coming weeks!

Summary of the Senate Budget Passed May 23

General Provisions

·      Government Efficiency and Reform: The Office of State Budget and Management shall contract for a Government Efficiency and Reform review and analysis of the executive branch of State government, which shall be known as NC GEAR. The purpose of the review and analysis is to evaluate the efficiency and effectiveness of State government and to identify specific strategies for making State government more efficient and effective. The review and analysis may examine entire departments, agencies, or institutions, or similar programs in different departments.

·      Next Generation Secure Driver License System: As part of a report required by August 1, 2013, the Dept of Transportation must report on requirements and costs to implement a process to allow persons who are homebound to apply for or renew a special photo identification card, with a color photo, similar in size, shape, design, and background to a drivers license, by means other than personal appearance.

Education

·      Eliminate LEA Flex Cut - $376 mil restoration of funds for local school districts.

·      Classroom Teacher Cut - $286 mil cut in FY14 and $245 mil cut in FY15. Ratios for distributing guaranteed positions are revised to achieve this reduction (In 2013-14: K 1:19, 1-3 1:18, 4-6 1:24, 7-8 1:23, 9 1:26.5, 10-12 1:29).

·      Eliminates TAs in grades 2 and 3 and lowers the per student amount for TAs in K-1 - $142 mil cut in FY14 and $149 mil cut in FY15.

·      Instructional Support Personnel - $16.9 mil cut in FY14 and $17.1 mil cut in FY15. This will reduce the number of social workers, counselors and psychologists in schools.

·      Education Services for Children in Juvenile Facilities: Transfers responsibility and funding for teachers in juvenile facilities to DPI eff. July 1, 2014.  LEAs with a Youth Development Center or Detention Center in their district will be responsible for providing services and will receive funding from DPI ($3.8 mil allocated in 2014).

·      Funding for three additional consultants in the DPI Office of Charter Schools ($320k per year).

·      Excellent Public Schools Act - $18.6 mil increase in FY14 and $35 mil increase in FY15 to carry out provisions of the Excellent Public Schools Act, and $10.2 mil in FY15 for teacher merit pay.

·      Eliminates class size requirements.

·      Residential Schools: DPI shall not transfer any school-based personnel from the State's residential schools to central office administrative positions. The Special Provision also states that DPI shall retain all proceeds generated from the rental of building space on the residential school campuses. These receipts shall not be used to support administrative functions within the Department.

Health and Human Services

Division of Central Management and Support

·      Eliminates 6 positions associated with NC Care Line, which was previously eliminated in 2011.

·      Provides $3.8 mil in FY14 and $9.4 mil in FY15 for implementation of the DOJ settlement, to develop and implement housing support and other services for people with mental illness.  Said to fund 150 people in FY14 and 708 in FY15.

·      DHHS Competitive Block Grants for Non-Profits: Creates a competitive block grant process to fund non-profits for services that have historically been provided by non-state entities. The $9.5 mil allocation can fund programs directed at enumerated issues including autism services, brain injury, substance abuse, services for children and adults with I/DD and MI, food distribution, homelessness, and services for individuals aging out of foster care.

·      Modifications to Commission for the Blind: Eliminates the Professional Advisory Committee; and adds 6 members to the Commission for the Blind: 2 ophthalmologists, 2 optometrists, and 2 opticians (these appointments are also exempted from the requirement that a majority of the commission be persons who are blind).

Division of Child Development and Early Education

·      Pre-K Transfer – Transfers 2,500 NC Pre-K slots ($12.4 mil) in FY14 and 5,000 NC Pre-K slots ($24.9 mil) in FY15 to the Child Care Subsidy program. It also directs that all Child Care Subsidy dollars will be administered by local DSS agencies, not Smart Start.

·      Maintains current NC PreK standards except for children who have Limited English Proficiency.

Division of Aging and Adult Services

·      Project CARE: Transfers HCCBG funds to expand Project CARE statewide.

·      Tiered Special Assistance: Directs the Division to establish a pilot program in 4-6 counties (at least 2 urban and 2 rural) to implement a tiered rate structure within the State-County Special Assistance program for individuals residing in group homes, in-home living arrangements, and assisted living residences as defined in G.S. 131D-2.1. The  purposes of the pilot program are to (i) determine the best way to implement a block grant for this program statewide and (ii) test the feasibility and effectiveness of implementing a tiered rate structure to address program participants' intensity of need, including medication  management. The pilot program shall be implemented during the  2013-2014 fiscal year for at least a 12-month period. The Department shall implement the pilot program in collaboration with the local departments of social services in the counties selected for participation. As part of the pilot program, the selected counties shall receive a State General Fund allocation as a block grant to be equally matched with county general funds. The General Fund allocation provided to each county participating in the pilot program shall be calculated  based upon the average annual Special Assistance expenditures for that county during the 2011-2013 fiscal biennium, adjusted for the amount of projected annual growth in the number of Special Assistance recipients in that county during the 2013-2015 fiscal biennium. These funds may be used to pay for room, board, and personal care services, including medication management, for individuals eligible to receive State-County Special Assistance, subject to the  following limitations and requirements:   (1) These funds shall not be used to cover any portion of the cost of providing services for which an individual receives Medicaid coverage. (2) The pilot program shall comply with all federal and State requirements governing the existing State-County Special Assistance program.  (3) The tiered rate structure shall be based upon intensity of need, and an individual's placement within a tier shall be based upon an independent assessment of the individual's need for room, board, and assistance with activities of daily living, including medication management.

Division of Mental Health, Developmental Disabilities and Substance Abuse Services

·      Alcohol and Drug Abuse Treatment Centers: Close all 3 ADATCs.  A fraction of the savings from the cut will go to fund MCO treatment services - $10 mil in FY14 and $20 mil in FY15.

·      Wright School: Eliminates the program with a $2.7 mil recurring cut.

·      NC Child Treatment Program – The Child Treatment Program is an evidence-based platform that provides training and support to mental health providers to ensure fidelity and outcomes. $1.8 mil Recurring and $250K non-recurring.

·      Implement a statewide telepsychiatry program

·      Local Inpatient Psychiatric Beds (3 way contracts): Realigns the Division's base budget to transfer $9 million to increase the number of three-way contract community hospital beds available to Local Management Entities/Managed Care Organizations from 141 to 186.

Division of Public Health

·      AIDS Drug Assistance Program: Directs Public Health to submit a report to the HHS Oversight Committee on the  use of the funds appropriated to support ADAP for the preceding fiscal year; steps taken by DHHS to reduce the waiting list; alternative options for serving individuals diagnosed with HIV/AIDS who are eligible to receive services under ADAP, including the State Medicaid program and the federally facilitated Health Benefit Exchange that will operate in this State.

Division of Health Services Regulation

·      Three-Year Moratorium On Special Care Unit Licenses (July 1, 2013- July 1, 2016). This prohibition shall not restrict the Department from doing any of the following: Issuing a license to a facility that is acquiring an existing special care unit; Issuing a license for a special care unit in any area of the state upon a determination by the Secretary that increased access to this type of care is necessary in that area; and Processing all completed applications for special care unit licenses received prior to June 1, 2013.

·      Eliminate Comprehensive Report On Medication-Related Errors In Nursing Homes.  Repeals G.S. 131E-128.5, which requires the Secretary to contract with a public or private entity to develop and implement a Medication Error Quality Initiative. The Initiative provided for the receipt and analysis by the contracting entity of annual reports from each nursing home on the nursing home's medication‑related errors.

Division of Medical Assistance (Medicaid)

·      Medicaid Reform: Directs DHHS to create a detailed plan for, but not implement, significant reforms to the State's Medicaid Program that shall accomplish the following: (1) Create a predictable and sustainable Medicaid program for North Carolina taxpayers.(2) Increase administrative ease and efficiency for North Carolina Medicaid providers.(3) Provide care for the whole person by uniting physical and behavioral health care.  The Department shall submit its reform plan to the General Assembly no later than March 17, 2014, but is encouraged to submit its plan as early as it responsibly can. 

·      Co-pays: Increases co-pays to the maximum allowed by the feds. $3.3 mil reduction in FY14 and $5 mil reduction in FY15.

·      Hospital Outpatient Reduction – Reduces hospital outpatient reimbursements from 80% of costs to 70% of costs. $20.3 mil recurring reduction in FY14 and $42 mil recurring reduction in FY15.

·      Shared Savings Payment Plan – This establishes a 4% withholding on certain services that can later be reallozated to the providers based on savings achieved.  Services covered include Inpatient hospital, Physician, excluding primary care until January 1, 2015, Dental, Optical services and supplies, Podiatry, Chiropractors, Hearing aids, Personal care services, Nursing homes, Adult care homes, and Drugs.  DHHS will work with providers to develop a shared savings plan that will be implemented by January 1, 2015 that will include incentives to provide effective and efficient care that results in positive outcomes for Medicaid recipients.

·      Rate Freeze – This line freezes rates for a variety of services subject to an automatic increase.  $18.3 mil cut in FY14 and $28 mil cut in FY15. Hospital outpatient services' percentage of cost shall be adjusted to compensate for expected inflation that hospitals would be eligible for, and cost settlement will only be up to that percentage. Nursing direct care services shall not receive case mix index increases after June 30, 2013, until reinstated. The following rates are excluded: Federally Qualified Health Centers, Rural Health Centers, State-Operated services, Hospice, Part B and D Premiums, third-party and HMO premiums, drugs, and MCO capitation payments.

·      Medicaid Rebase - $434M expansion in FY14 and $607M expansion in FY15. The rebase accounts for enrollment growth and expected utilization.

·      Affordable Care Act – Senate budget writers include $49.7M in FY14 and $114M in FY15 for new Medicaid recipients under the ACA. The state anticipates significant enrollment growth as a result of penalties for non-coverage and outreach efforts.
Health Choice Transfer – All children under 133% of FPL will be served by Medicaid beginning 1/1/14. This line item transfers $22M in FY14 and $46M in FY15 from Health Choice to Medicaid to cover those costs.

·      Clarify State Plan Amendment Procedures: The Department may submit amendments to the State Plan only as required under certain enumerated circumstances: A law enacted by the General Assembly eithers directs the Department to submit an amendment to the State Plan, or makes a change to the Medicaid Program that requires approval by the federal government; A change in federal law, including regulatory law, requires an amendment to the State Plan; A change made by the Department to the Medicaid Program requires an amendment to the State Plan, if the change was within the authority granted to the Department by State law; or An amendment to the State Plan is required to ensure continued federal financial participation.  Additionally, 10 days prior to submitting an amendment to the State Plan to the federal government, the Department shall post the amendment on its website and notify the members of the Joint Legislative Oversight Committee on Health and Human Services and the Fiscal Research Division, that the amendment has been posted, and further explanation of the amendment under certain circumstances.

·      Community Care Of North Carolina Study. Provides funding for a study to determine whether the CCNC model saves money and improves health outcomes. This was recommended by the State Auditor in the January 2013 performance audit of the Medicaid Program.

·      Codify Rulemaking Changes: Amends § 108A-54.1B to add 3 subsections: (b) Prior to filing a temporary rule authorized under G.S. 150B-21.1(a)(17) with the Rules Review Commission and the Office of Administrative Hearings, the Department shall consult with the Office of State Budget and Management on the possible fiscal impact of the temporary rule and its effect on State appropriations and local governments. (c) Rule-making authority granted under this section for particular circumstances or programs is in addition to any other rule-making authority granted to the Department under Chapter 150B of the General Statutes. (d) State Plans, State Plan Amendments, and Waivers approved by CMS for the Medicaid Program and Health Choice program shall have the force and effect of rules adopted pursuant to Article 2A 22 of Chapter 150B of the General Statutes. G.S. 150B-1(d) is also amended by adding a new subdivision to exempt DHHS from rule making with respect to the content of State Plans, State Plan Amendments, and Waivers.

·      Codifies Medicaid Eligibility requirements, as well as re-codifying coverage for workers with disabilities.

·      Service caps beginning January 1, 2014: (1) Prior authorization is required for visits in excess of 10 within a year for professional services provided by physicians, nurse practitioners, nurse midwives, physician assistants, clinics, and health departments,. This limitation and prior authorization requirement does not apply to chronic conditions. (2) Adult private duty nursing (PDN) is limited to four hundred thirty-two dollars ($432.00) per day. (3) Adult rehabilitation home visits for set-up and training are limited to three within a 12-month period.  (4) Prior authorization is required for all mental health drugs. A 72-hour emergency supply may be provided if a beneficiary is waiting for acknowledgment of the prior authorization request.

·      PCS Additional Services: allows additional PCS hours for recipients who have a degenerative disease characterized by irreversible memory dysfunction that attacks the brain and results in impaired memory, thinking, and behavior including gradual memory loss, impaired judgment, disorientation, personality change, difficulty in learning, and the loss of language skills. The Department shall reduce the rate for personal care services in order to fund the additional service hours authorized under this section within the budgeted amount of funds for personal care services.

·      Medicaid Subrogation Provision to comply with recent Supreme Court decision.

·      Repeal of Medicaid Appeal Provision: Repeals G.S. 108C-12(d) which currently says: “Burden of Proof. – The Department shall have the burden of proof in appeals of Medicaid providers or applicants concerning an adverse determination.”

·      Codify Counties Sharing In Fraud Recovery: Adds a new section to 108A: § 108A-64.1. Incentives to counties to recover fraudulent Medicaid expenditures. The Department of Health and Human Services, Division of Medical Assistance, shall provide incentives to counties that successfully recover fraudulently spent Medicaid funds by sharing State savings with counties responsible for the recovery of the fraudulently spent funds.

·      Payment suspension and audits utilizing extrapolation. Rewrites 108C-5 to allow the Department to withhold payment (not exceed the amount of any interest required by law plus nine percent (9%) of the sum of the total overpayment amount identified in the notice of overpayment and any penalty required by law) from providers prior to the completion of an appeal regarding an overpayment

·      Codify Provider Performance Bonds: Adds § 108C-14 to allow the Department to require Medicaid-enrolled providers to purchase a performance bond in an amount not to exceed $100,000.  The Department may require the purchase of a performance bond or the submission of an executed letter of credit or financial instrument as a condition of initial enrollment, reenrollment, recredentialing, or reinstatement if any of the following are true: (1) The provider fails to demonstrate financial viability. (2) The Department determines there is significant potential for fraud and abuse. (3) The Department otherwise finds it is in the best interest of the Medicaid program to do so.

·      Writ to superior court on OAH decision: Allows any party to a contested case at OAH to petition the Superior Court for a writ of certiorari, mandamus, prohibition, supersedeas.

·      CCNC to develop a pay for performance model using PMPM payments to encourage better care management.

·      Requirements for governing board of managed care entity: Requires a specific board make-up for any entity contracting with the state for management of care and cost containment, including members appointed by the General Assembly.

Department of Public Safety

Division of 
Juvenile Justice



·      Closes Buncombe, Richmond and Lenoir YDCs - $5.35 mil recurring cut.



·      Community Programs - $1.5 mil recurring increase. 


·      $550k per year to continue operating a Multipurpose Group Home in Craven county.

Administrative Office of the Courts

·      Special Superior Court Judges abolished

·      Expunction fee raised from $125 to $175

Adult Corrections

·      Closes Bladen, Duplin, Robeson, Wayne, Western Youth, Buncombe and Orange Correctional Centers.

·      Eliminates the State contract with Prisoner Legal Services and replaces with software for use in the prison libraries.

Department of Administration

·      Eliminate Youth Advocacy and Involvement Office

Secretary of State

·      Lobbyist registration and principal fees raised to $250 with no waiver or reduction for nonprofits

General Government

·      Implement voter photo ID requirement

·      Eliminates $185k to the School of Government

·      $876k/year reduction to HTF

·      Office of Administrative Hearings – add 1 ALJ and one law clerk