The State of the State

What: Gov. Beverly Perdue will deliver her State of the State address

When: Monday, Feb. 14, 7 p.m.

Where: House Chambers at the State Legislature

What else: She will release her proposed budget after the address.

When you hear state legislators say “everything is on the table” for budget cuts, these are the sort of programs they mean: School nurses. Funding to root out abuse against children and people with disabilities. Education and treatment programs for serious diseases. Early childhood development programs. Prescription drug benefits for senior citizens and the seriously disabled.

The N.C. Department of Health and Human Services, which oversees these programs, spends 20 percent of the state’s money. That means as the Legislature and Gov. Beverly Perdue begin slashing $3.7 billion from the state budget, DHHS is vulnerableand Medicaid, which is under that departmentis particularly so.

Medicaid is taxpayer-funded health insurance for people who are poor or who have disabilities. The federal government mandates what services states must provide to those people. It also gives state governments money to help pay for those servicestwo or three dollars for every dollar of state fundingand allows the states to choose “optional” services to provide.

Thirty-six of the state’s 78 Medicaid servicesnearly halfare deemed “optional” by the federal government. And these 36 optional servicesalthough if you’re the person receiving them, you might view them as essentialare up for review, according to Senate Appropriations Committee Co-Chairman Richard Stevens, R-Wake. And it’s possible that all 36 should be funded, Stevens said.

But nearly all of these optional services are categorized as prescription drug programs, mental health care and assisted living for senior citizens and people with disabilities, according to the DHHS report.

Federal law requires Medicaid to provide “all medically necessary health care” to children in the program, according to Health and Human Services Secretary Lanier Cansler, so cuts would have to be made to adult programs.

But these programs serve the state’s neediest adults: those over age 65 or who are disabled, pregnant or so “medically needy” that all their money has been eaten up by medical costs, Cansler said.

So if the Legislature cuts optional benefits, senior citizens and the severely disabled would likely suffer. And those cuts would happen while the Legislature allows the 2 to 3 percent income tax surcharges on people earning at least $100,000 to expire.

Those surcharges, and a penny sales tax increase, have been used to balance the budget the last two years, but they go off the books July 1 without legislative action. Perdue has said she would consider keeping them, but many Republicans campaigned on letting them expire. Together, the taxes raise about $1.3 billion in annual revenue.

Tough as this may be to hear, Stevens said Medicaid cuts would be considered. Another Wake County Republican, state Rep. Nelson Dollar, will be involved on the House side as co-chairman of the Health and Human Services Appropriations Subcommittee. On Monday Dollar promised to “fully review all of the options available to us” with “an eye toward ensuring” that people in need get their needs filled efficiently.

Hospitals, though, could dodge some of the health care budget cuts. For example, any doctor or facility that treats patients on Medicaid relies on the program to pay for the services. However, Medicaid generally pays significantly less than the cost of treatment, and these lower payouts make it difficult for patients to find providers who accept Medicaid, according to Adam Searing, project director for the North Carolina Health Access Coalition at the N.C. Justice Center.

So the North Carolina Hospital Association is pushing Senate Bill 32, which would tax hospitals at a low rate, raising more than $200 million a year in new revenue for the state. That money would be used to draw down more federal funding for the program, and together this would generate more than $500 million for Medicaid, according to initial estimates.

Bill sponsor and Senate Appropriations Committee Co-Chairman Peter Brunstetter said there’s no guarantee the state wouldn’t still cut provider rates to help balance the budget, but hospital officials are hopeful the new revenue would convince legislators not to.

An extra $43 billion is also built into the SB 32 to help “to keep our hospital system strong,” Dollar said, and particularly to help rural facilities from losing money because they accept Medicaid.

If Medicaid proves too difficult to cut, more attention will turn naturally to DHHS’ other missions: protection of the children and help for the poor.

A 10-page chart that DHHS submitted to the governor late last year lays out $739 million in potential cuts for the governor to choose from. They include:

  • Cutting of the Division of Public Health’s funding for school nurses, saving $12.7 million
  • Ending funding for social workers who follow up on reports of neglect and abuse against disabled people, saving $2 million in 52 counties
  • Five-to-15 percent cuts for Smart Star education programs for children under 5, saving $9.4 million
  • Less funding for independent living programs meant to keep disabled people out of institutions, saving $3.8 million
  • An end to reimbursements for doctors who care for migrant workers, saving $736,000 annually
  • $5 million less for counties to spend on child protection services

Other cuts include the state’s “More at Four” program for at-risk children; HIV, diabetes and teen pregnancy education programs for minorities; and $41 million less for various mental health, physical disability and drug programs.

If these drug and mental health treatment programs get the ax, it could be a double whammy for people receiving services. Several similar programs operated out of the state Department of Corrections are also on the list of potential cuts.