Strategic edits made to the N.C. Department of Health and Human Services response to an audit critical of the state's Medicaid program raise questions about whether key facts were withheld to make the program appear worse off than it really is.
Gov. Pat McCrory has used the January audit to make a case for privatizing the state's $13-billion Medicaid system.
A spokesman for State Auditor Beth Wood said Wednesday she is concerned about the revelations and is reviewing the newly disclosed information.
The edits made by then-Medicaid Director Carol Steckel were first reported Tuesday by the nonprofit website North Carolina Health News.
Steckel resigned this month to take a job with WellCare Health Plans, a for-profit managed-care company that may bid on running the state's Medicaid system. During her nine months with the state, Steckel had been Wos' primary point person on Medicaid reform.
DHHS Secretary Aldona Wos told legislators Tuesday at an all-day oversight hearing that she stands by the audit response she signed in January, though she had not yet read the Health News articles.
"We like having audits in our department," Wos said. "The audits are very helpful for us; they're insightful, they're helpful, they're instructive. ... We came in January and looked at all our tasks with a new pair of eyes."
Wos said she sees no conflict of interest with Steckel's work prior to landing her new private-sector job.
The secretary insisted that no decision has been made about whether to seek privatization of the state's Medicaid system, even though she has hired a $250-an-hour consultant who is an expert in managed care to advise her. Wos said a formal reform plan will be unveiled early next year.
McCrory has been saying for months he would like to overhaul Medicaid by having private companies offer taxpayer-funded health care plans covering the poor, the elderly and people with disabilities. The governor has repeatedly cited the January audit as evidence that Medicaid is "broken," and that managed care could help reign-in costs.
Findings of the audit issued by Wood included the assertion that North Carolina's administrative spending for the state's Medicaid program is 38 percent higher than in nine states of similar size and that cost overruns with the program had totaled $1.4 billion in just three years.
The official DHHS response signed by Wos agreed with the audit findings, leaving the critical assessment of the agency's oversight of the program unchallenged.
N.C. Health News filed a public records request in March for drafts and emails related to the agency's audit response, but not all of the documents were disclosed until last week.
Among the items eventually released by DHHS is a word processing file that allows changes made to the audit response to be tracked through the various drafts of the document. The record shows Steckel deleted key passages raising questions about the accuracy of some of the audit's findings.
For example, Steckel cut an analysis showing that when all administrative costs were included, North Carolina actually ranked below average in spending to manage its Medicaid program among similarly sized states.
Steckel also trimmed documentation that the administration of McCrory's predecessor, Democratic Gov. Beverly Perdue, had repeatedly warned lawmakers at the Republican-controlled General Assembly that cuts they were mandating to the Medicaid budget were unrealistic. That set the stage for cost "overruns" when the budgeted savings weren't realized.
Bill Holmes, spokesman for Wood, said Wednesday the state auditor is "concerned" about the news reports about the edits, as well as other information that came to light during Tuesday's oversight hearing.
"We are currently reviewing information from each of these sources and will soon provide a detailed response to questions about our work," Holmes said.
Asked if Wos had any additional comments Wednesday after having an opportunity to read the media reports about the editing changes, spokesman Ricky Diaz said the secretary had objected to the "defense tone" of the original draft response.
"After $1.4 billion of unexpected shortfalls in Medicaid under the former administration, it was clear that our system needed improvement," Diaz said. "We looked at the audit's findings and accepted them."