N.C. Medicaid Administrative Costs

The line “Medicaid is broken so we can’t expand it” has been repeated ad nauseum in North Carolina during the past year, with a key claim being that North Carolina spent more than several comparator states on administrative costs. Adam Searing recounts the events of the past year, including factual push back that unfortunately had little political impact.

A recent North Carolina General Assembly Fiscal Staff study shows that not only are the North Carolina Medicaid Program’s administrative costs not higher than those State’s to which they were compared, but are actually lower:

ScreenHunter_01 Nov. 25 13.51

Slide 20 above shows where North Carolina ranks in terms of percentage of program costs going to administration as compared to the states used for comparison in the Spring. The source of the earlier error was that amounts being paid to managed care companies were being to assumed to go 100% toward patient care, when in fact managed care companies used some of that for administrative costs (as they reasonably could be expected to do), and a portion of the money would go to profit (as is reasonable to expect; why else would they being doing it).

Above is an apples-to-apples comparison. The earlier mistake was not one of getting the numbers wrong (from the CMS-64 form). It was a case of the numbers not being very meaningful in the manner they were presented given the rise in managed care across many of the comparator states. As the N.C. Fiscal Staff Study from last week noted:

ScreenHunter_02 Nov. 25 14.01

North Carolina doesn’t have higher than expected administrative costs; they are actually lower than those used for comparison last January. This is not a reason to not expand Medicaid in North Carolina.


About Don Taylor
Professor of Public Policy (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute), and Chair of the Academic Council at Duke University https://academiccouncil.duke.edu/ . I am one of the founding faculty of the Margolis Center for Health Policy. My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

2 Responses to N.C. Medicaid Administrative Costs

  1. forrest perrigo says:

    Are the claims of cost overrun overblown? Are there not budget overruns? If so, why? If not, why?

    • Don Taylor says:

      this is a good question. At least some of the cost overruns have been predictable because an unrealistic budget was passed. see item #4 in this post that has a copy of the past Sec of HHS to Speaker Tillis and Gov Perdue

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