Funding healthcare in the N.C. budget
Published October 18, 2014
by Sarah Curry, John Locke Foundation, October 17, 2014.
In honor of Healthcare Solutions Week, I wanted to share with you some information about North Carolina’s Health and Human Services budget.
The N.C. Department of Health and Human Services is made up of 30 divisions and offices, which are categorized under four broad areas: health, human services, administration, and support. In addition, the department oversees 14 facilities, including developmental centers, psychiatric hospitals, and alcohol and drug abuse treatment centers, among others.
Last year the General Assembly enacted a $5.1 billion General Fund budget for DHHS, but that isn’t the total cost of health services in North Carolina. Some health programs are funded through other means, the main source being the federal government.
If we take total expenditures for DHHS in fiscal year 2014-15, the amount is closer to $19 billion, with 17,403 full-time-equivalent employees statewide. Out of the large departmental budget, there are three divisions that account for most of the budget: (1) the Division of Medical Assistance, more commonly referred to as Medicaid, $13.8 billion; (2) the Division of Social Services, $1.7 billion; and (3) the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, $1.4 billion.
Below is a breakdown of the 11 divisions within the department and their expenditures under the FY 2014-15 budget.
Medicaid, a health insurance program for low-income individuals and families, is the largest expenditure within DHHS and was the focus of much of this past year’s state budget debate. Medicaid takes up 73 percent of total expenditures within the department. The program faced an $81.7 million shortfall last year despite active efforts to avoid one of the recurring shortfalls that have plagued the program.
The latest shortfall set the stage for legislators to plan for reform. The legislature passed a law requiring the department to consult with stakeholder groups, and study and recommend options for a Medicaid reform plan intended to provide greater budget predictability.
Lacking reliable data for the 2014-15 fiscal year due to the implementation of a new computer system, unachieved budget reductions from the prior year, and more requirements from the federal Affordable Care Act, the legislature established a $186 million reserve fund for another potential Medicaid shortfall.
The second-largest expenditure within the agency is the Division of Social Services, which works in the areas of adult services, child care, child support, energy assistance, financial assistance, food and nutrition services, health coverage, child welfare, and public assistance fraud. These programs are authorized by and substantially paid for through the federal government. North Carolina has been given the responsibility of creating these programs at the state level and overseeing the implementation and support of these programs in each county. Local social service departments in each of the state’s 100 counties deliver services to citizens.
According to a report from the General Assembly’s Fiscal Research Division, the major budget changes that occurred in the Division of Social Services were to child care subsidies and child protective services. Previously, child care subsidies were given to families earning 75 percent of the state median income. Now families are eligible at 200 percent of the federal poverty level for children up to 5 years old and special-needs children, and at 133 percent for children ages 6-12.
There was no change to eligibility for children in foster care and those receiving child protective or child welfare services. These children will continue to receive assistance without any income level requirement. Most families, while receiving child care services, are required to make a co-payment. The new law has set co-payments at 10 percent of the family’s income, regardless if it is on a part- or full-time basis. Child Protective Services received $7.3 million to reduce investigative workers’ caseloads, as well as $4.5 million for Child Welfare In-Home Services to help parents learn more effective parenting skills.
Overall, DHHS makes up a large portion of our state’s budget, nearly a quarter of General Fund expenditures. If we take a look at the state’s budget in 1980 and then compare to today’s budget allocations, Health and Human Services spending has increased over 260 percent, even when accounting for inflation. During the Easley administration, Health and Human Services became state government’s largest expenditure. Since 2005, the DHHS budget has been consistently higher than education appropriations, which historically had been the largest expenditure in state government.
Sarah Curry is Director of Fiscal Policy Studies for the John Locke Foundation.
