An audit found that South Carolina’s Medicaid agency has improved its budget practices– a year after it nearly ran a $922 million deficit.
The report released Wednesday by the state Legislative Audit Council focused on the actions of the South Carolina Department of Health and Human Services (DHHS) during the final year of Mark Sanford’s term as governor.
The audit found DHHS made unauthorized delays in its June 2010 payments and reached into its 2011 funds to avoid a deficit in the 2009-2010 fiscal year. However, those moves only made the agency’s deficits worse the next year. “They were able to address the deficit, but it pushed it down the road into 2010-2011,” LAC director Perry Simpson told South Carolina Radio Network, “They started (Fiscal Year 2011) with a deficit that basically just got worse during the course of the year.”
In fact, that deficit eventually grew to $222 million in state funds (and over $700 million in matching federal funds). But DHHS did not warn lawmakers that it faced a budget crunch until November 2010– five months into the new fiscal year and two months before new governor Nikki Haley would take office. According to the report, neither the Governor’s Office nor legislators were ever told how close the agency had come to operating in the red the previous year.
There were a multitude of reasons for the deficit, the report said. Across the board budget cuts slashed $70.5 million in state funds, while a transition from fee-for-service to managed care systems clouded the agency’s cost predictions. It didn’t help that an economic downturn created a 5.4 percent increase in the number of people dependent on Medicaid. Or that the average person had a 5.4 percent increase in their Medicaid costs on top of that.
“You had more people than they expected getting more services than they expected,” Simpson said. The state Budget and Control Board eventually approved the $222 million deficit in June 2011. The audit was requested by then-Sen. Glenn McConnell soon afterward.
As part of their report, LAC auditors recommended that DHHS complete quarterly budget reports every three months. Current DHHS Director Tony Keck (who did not take over the agency until January 2011) agreed with the recommendations, saying his office had already begun issuing the reports. He also called on lawmakers to make similar requirements of other state agencies.
Keck has been able to stop much of the bleeding at the agency, helped by more funding from state legislators and a 2011 law that lets the agency cut how much it pays providers for Medicaid services.
The LAC report also expressed concerns about potential conflicts-of-interest among some former DHHS employees working in the private sector. The report focused on two unnamed, high-ranking DHHS officials who were responsible for approving payments to a company that ran a private medical home network on behalf of DHHS. The report said both resigned to work for that same company in 2011.
Simpson said the move shows tougher laws are needed to prevent a “revolving door” between state agencies and the private businesses they are supposed to regulate. ”There might be inadvertent or advertent favoritism shown towards a company with former co-workers,” he said.
The report also showed an increasing number of South Carolinians are relying on Medicaid for their health care expenses. 22 percent of South Carolinians are covered by the program in the 2010-2011 fiscal year, including 43 percent of all children. Half of all births were funded by Medicaid, as were 75 percent of nursing home beds.