NC Medicaid forecasts small budget surplus for fiscal year, but also says that could change

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RALEIGH, North Carolina — North Carolina's Medicaid office predicted Tuesday it would have a small surplus for this fiscal year despite a spike in prescription drug spending and continued enrollment growth for the health insurance program that serves more than one in six state residents.

The forecast is another sign the beleaguered program is in a better financial position compared to recent years, when shortfalls reached hundreds of millions of dollars.

Acting state Medicaid finance director Rudy Dimmling said the agency's forecast of spending $68 million less than state appropriations and receipts taken in by the end of June comes with many caveats.

"Forecasts change. They're constantly evolving," Dimmling told the Joint Legislative Oversight Committee on Health and Human Services. But "based upon what we see as of right now, we anticipate that we will come in under budget."

North Carolina's Medicaid system spends more than $13 billion annually, of which $3.7 billion in state funds is budgeted to be spent this year.

Dimmling attributed the positive forecast to a budget that's tracking actual spending levels, and to Medicaid enrollment, which while growing by nearly 6 percent early in the fiscal year, should fall short of previously projected levels. Medicaid serves about 1.8 million North Carolina residents, mostly poor children, older adults and the disabled.

Dimmling cautioned the forecast surplus of $26 million to $109 million could vanish if there are additional costs caused by a bad flu season or scares associated with Ebola. Federal health care overhaul costs also are uncertain.

He offered the forecast while presenting figures showing Medicaid spent $528 million more overall in the first quarter compared to a year ago. Dimmling attributed more than half of the increase to one-time events or billing issues. Lawmakers also added more than $1.1 billion to the last two-year budget approved in 2013 to prepare for additional costs.

The rosier picture is likely to increase calls to expand Medicaid in North Carolina through President Barack Obama's signature health care law to cover more of the working poor. Gov. Pat McCrory's administration has said this fall it's been studying whether it makes sense to participate now after soundly rejecting it nearly two years ago.

Outgoing House Speaker Thom Tillis, R-Mecklenburg, said during his successful U.S. Senate campaign colleagues should consider expansion next year because the Division of Medical Assistance was operating in a more fiscally sound manner.

Other lawmakers remain skeptical about expansion or believe the division first should complete more Medicaid repairs or an overhaul. With Republicans in charge of the U.S. Senate come January, Congress is also expected to try to scale back the federal health care law in 2015. The U.S. Supreme Court has agreed to hear a case involving a key component of the law.

"I believe that Medicaid reform really needs to come before we pursue the expansion options," said Rep. Nelson Dollar, R-Wake, senior co-chairman of the House Appropriations Committee. That could mean waiting on expansion until after next year's legislative session ends in the summer.

House and Senate Republicans last summer approved competing overhaul bills but didn't find a compromise. Two oversight subcommittees have looked at the issue since the August adjournment.

Dimmling, part of a consultant's team hired to stabilize Medicaid spending and improve forecasting, said he was concerned about a $74 million increase in additional drug spending for Medicaid recipients. Efforts were being made to determine the causes and make changes, Health and Human Services Secretary Dr. Aldona Wos said.

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