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Senate | June 26, 2014 | Committee Room | Appropriations

Full MP3 Audio File

Good morning everybody. If members would take their seats, and audience would take their seats, we'd appreciate it. Please take your seats. This thing ain't working. Hello? can y'all hear this? Kessler? can you hear this? Okay. Thank y'all for taking your seats. This morning we're going to have a lively discussion, I'm sure. Let me first introduce the pages: We have Zack Mayer, representing- sponsored by Tommy Tucker. Joseph Womble, sponsored by Sen. Jackson. Gabby Huberts sponsored by Sen. Tucker. Alexis Johnson-Mobley, sponsored by Sen. Blue. Ryan Burnett, sponsored by me. Weston Davis, sponsored by me. Thank y'all pages for your service. Our Sergeant at arms this morning are Ed Kessler, Canton Lewis, Isaac Walker, and Billy Fritcher. The purpose of this meeting this morning is to try to resolve the large differences between medicaid estimates from OSBM, and the estimates of the legislative fiscal staff. The inability to agree on a concensus estimate for the medicaid shortfall for 2013-14 and the rebates number for 2014-15, has kept us from being able to finalize the 2014-2015 budget. Our goal is to avoid the very large underestimation of medicaid costs that we have seen over the last several years. This morning, Art Pope, the budget director, is going to tell the committee of how his office arrived at their estimates, and then the legislative fiscal staff will explain their estimates. The committee will get a chance to ask both OSBM and fiscal staff questions about how they arrived at their estimates. Hopefully after evaluating the source of their numbers, we'll be able to reach a concensus on the amount we should set aside for medicaid reserves. Thank you Art Pope for coming, and I'm looking forward to hearing your presentation. [SPEAKER CHANGES] Sen. Hunt, members of the committee, thank you for giving OSBM this opportunity, I believe that the Office of State Budget Management, the Dept. of Health and Human Services, the Fiscal Research division, have actually been working for months trying to analyze the data and reach a concensus forecast where respectfully understand each others numbers and agree or we disagree. In brief, and I'll be quick in the intrest of time, representing the Dept. of Health and Human services today, and available to answer specific questions are Rod Davis, Chief Financial Officer for the Dept. of Health and Human Services, Joe Cooper, Chief Information Officer for the DHHS, Rudy Demling, the acting finance director for the division of medical assistance, Angelo Taylor for the division of NC Fast, of course I'm Art Pope, state budget director, in this presentation today I will be assited by Tony Gurley, the Chief operating officer and deputy for the state budget and management, and Pam Kilpatrick whom you all well know as the senior ?? for Health and Human Service including Health and Medical for DMA. Mr. Chairman and committee, this review's going to be broken up in two parts, the first part we're gonna go through very quickly, I'll review OSBM and HHS roles in the budget, preparation and medicaid, and the comparison of general assemblies, fiscal research division, and final medicaid budget as been delivered on June 24th, which was on two days ago, and I'll welcome to stand to be corrected and update the information that fiscal research divison has, and add to the Governor's recommended budget. [SPEAKER CHANGES] I do think there needs to be some clarification. Office of State Budget and Management does not do medicaid forecasting. We do budget development for the Governor, we're delegated and directed by statutory authority. So we see budget requests from state agencies, including Health and Human services, including DMA and we develop the budget, we do not actually do the forecasting. And of course, routine we recommend the budget to general assembly, even numbered years which this year is, we recommend adjustments for the ?? budget, and of course Governor McCrory released his ?? budgets on May 14th. And again, to be specific, the management of medicaid's of DHHS which I recieved the medicaid program. That's chapter 108-54, the natural practice.

Actually Health & Human services prepares an annual estimate of Medicaid spending revenues referred to as the Medicaid rebates. And again this rebate is an estimate of funds needed to continue program under existing law. And of course last year and this year, we'll here a lot of discussion about this. We have new Federal law with a merit and portable care act directing new enrollments. So there are other issues in addition to the rebates for that increase spending. The rebate changes are difference between the estimate in spending less existing revenues to produce an incremental change. Mr. Chairman, if I'm going to fast let me know. But you have the written material and I know we have lots of discussion to do. But this is my main point. Department of Health & Human services prepares the Medicaid forecast about it. But LSVM and fiscal research. Both fiscal research and LSVM use this information for developing budget recommendations. So really LSVM and fiscal research are in the same position receiving the information and analyzing information. Because of the unique challenges this year which we will discuss, OSBM has being even more proactive. And I personally have been more proactive in working with HDHHS, working with fiscal research division, and analyzing numbers and changing numbers, updating numbers, booking holds on each others' theories. But again, ours is the budget development Mr. Chairman. We don't actually, LSVM does not actually do the forecasting. Which again is why we have a team with DHHS here as well. Mr. Chairman, this is something I think all of the party, fiscal research division, LSVM and DHHS all agree, this is a unique year and we do have severe limitation ?? datas and report due to these unique circumstances. We have two major new computer systems that will be fully utilized. It has been years in development, delayed and full implementation. That's NC fast regarding enrollment and NC tracks for claims processing. Those are two of the main issues. What happened to enrollments where's enrollment back log. What happened to claims pay, and what is the back log on claims pay? That's the heart of it. But even in the best in circumstances, transitioning to a new computer systems poses difficulty. This is particularly true of these systems. And there have been numerous meetings over the last year and a half on this issue. And I'm not gonna try and repeat it right now. The other major issue though is significant enrollment increases of affordable care act woodworking. Again in brief, these are individuals who are already qualified for medicaid but never participated in medicaid. However under the affordable care act they are required and forced into medicaid and a penalty wall to pay a tax back. So the question is how many numbers are there? How many will enroll and when will they enroll? And of course because of all the difficulties well recorded on the affordable care act and the Federal changes in North Carolina and other states, the enrollment is expected to start last fall and be effective January 1, which was actually delayed. Have nothing to do with the state of North Carolina, except we have to deal with the delay. So the issue the woodworking effect, and we're gonna elaborate on this later, is a major change and from current law major change, and with the numbers we have to deal with, determining how to deal with them, and that's caused a great deal of uncertainty. Now I believe I can say from putting fiscal research division that they say that this in writing, we agree. We were not talking about the formal forecasting. Not this year. Just too many changes because of the above. So we're doing estimates, trying to work on a consensus and reach agreement on what the numbers should be. There's really not what I think anyone at finance or budgeting would call a forecast because of these unique circumstances. We've been received inquiries about the material and information that has been provided to fiscal research division and the general assembly through fiscal research division. So I just want you to know this has been provided over 50 documents to the fiscal research division since January 1st. LSVM has met 17 times regarding Medicaid since January 1st, 2014. Now I know this is small print for those of you who do not have the printed handouts, but you'll see as recently as Tuesday the 24th we were meeting with fiscal research division. Had a long meeting on Friday June 20th. We had a meeting on Tuesday June 17th all over these numbers. And also in particular on that Tuesday June 17th, that was the meeting requested by of the state budget management with the conferee's with appropriation co-chairs we weren't sure if conferees be appointed over these questions. So we have been very actively engaged with this the research division and with the general assembly leadership. This I know you cannot read, and I'm not asking you to read it, but this is a list of material sent from ?? being with this research division giving the dates. There's a separate set of materials from DMA to fiscal research regarding Medicaid since January 1st, several pages of that.

...and then material from DHS central administration of Fiscal Research Division about 250 some told and, Mr. Chairman, just so there's no doubt about any information not being provided, here is a thumb drive, all those data files in one simple place. [SPEAKER CHANGES] Let's proceed on. Oh there we go, thank you. All right, one of the major issues that was specifically requested that we address in the letter from the co-chairman senate appropriation issue, was the claims backlog. We're going to have a review on the claims backlog first, and then the applications backlog second. In regards to the claims backlog, we're going to have Tony Gurley make that presentation. Let me say, by way of background, those of you who do not know Tony, he joined the state budget office back in about February. He is a former chairman of Wake county commissioners, is very actively involved in work with Wake Medical Center. Also served briefly on the CCNC board of directors so he is very familiar with this issue, far more familiar than I am, which is why I'm glad to be able to turn over this part of the presentation over to Tony. [SPEAKER CHANGES] Thank you. Again, my name is Tony Gurley, Chief Operating Officer for OSBM. Giving a review of the Fiscal Research Division's claims processing backlog estimate, on Tuesday June 24, OSBM received this document from Fiscal Research Division detailing revised estimates for an increased current year Medicaid claims backlog and an associated increase in next years rebates. FRD stated that the revised estimates are based on a provider survey that was provided by the North Carolina Hospital's Association and the communications between FRD and several large hospitals. This slide details the information that was provided by the Hospital Association on April 30, 2014. This slide indicates that FRD provided revised estimates of the current year claims backlog, I've highlighted the line that indicates the June 17th estimate of a $26 million backlog was increased on 6/24 to an estimated best case backlog of $212 million and a worst case backlog of $241 million. Those are total dollars. To provide support for this drastic action, FRD provided the information included on this slide. I would like to call your attention to two specific sections of this claims backlog estimate. The first section is a line detailing Carolinas HealthCare claims backlog and the second section in the bottom right corner details a whole dollar state share calculation. The two highlighted sections from the previous slide are expanded on this slide here. While...I'll leave that there...while OSBM did not use the same methodology to determine a claims backlog, we did notice immediately, two glaring errors in the documentation provided to us. The first error we noticed is evidenced by the mistaken treatment of Carolinas HealthCare's projected backlog of $41 million...$41.7 million. The $41.7 million increase in Medicaid accounts receivable from 2013-2014 was confirmed by the CFO of Carolinas HealthCare. In practice, providers are normally paid between 20 to 25% of billed charges. Therefore, Carolinas HealthCare can expect to be paid, at most, $10.4 million for their claims backlog. Correspondingly, they can expect a payment of around $9.2 million in the FRD column which adjusted their backlog down to $36.9 million. The corrected amounts that I just mentioned, have been input into the line next to Carolinas HealthCare on this slide. The $41.7 million...

dollar backlog was confirmed in this email from the CFO of Carolina's healthcare, and as you can see in the highlighted text at the top of the email, he confirms that his numbers reflect whole dollars including both the state and federal share amounts. This distinction is very important because it forms the basis of an explanation of the second substantial mistake we discovered in the FRD claims estimate. This slide details the 74 million dollar best case and 84 million dollar worst case FRD claims backlog estimate. These estimates are already provided as whole dollar amounts. FRD mistakenly assumes the numbers to reflect a state share, and adjusts these numbers to derive a new incorrect whole dollar amount. You'll see then that this mistake was then taken to FRD's June 24th revised estimate and that's where the best case 212 million dollar shortfall and 240 million dollar worst case shortfall were identified. Having corrected the two major errors that we identified in this estimate, you can now see that the model used by FRD should indicate that the best case is a 47 million dollar shortfall, and the worst case is a 53 million dollar shortfall in whole dollars. [SPEAKER CHANGES] Tony, before you go to the next section, the fiscal research staff would like to ask you a few questions on that form before you, I'll forget what you just said, will that be alright? [SPEAKER CHANGES] I'd rather finish. [??] [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] [??] Okay. OSBM is not the only entity to identify the mistakes in this claim's backlog estimate. This email notified FRD that the North Carolina Hospital Association, quote, "believes that the amounts owed to hospitals are less than those contained in the April analysis." Reading from second highlighted section, "in addition, we need to be very clear that the dollars in our analysis are total State and Federal. We think that the numbers you've recieved from conversations with hospitals are as well. From the hospital perspective, that's the amount they're owed. We believe that the amount the state owes to hospitals, the state's share of that amount is approximately one third of the total amounts identified in our April analysis and that you've received from hospitals." In conclusion, by correcting the two identified problems, FRD's best claims backlog is reduced from 212 million to 47 million. And the worst case claims backlog is reduced from 241 to 53 million. A lower claims backlog will reduce in a smaller short follow up at year end and thus affects the starting point and rebates necessary for next year. Since this is not the methodology used by OSBM, we are not in the position to calculate the impact of these mistakes on FRD's short fall and rebates estimates. OSBM has found the data provided by DHHS through it's NC track system to provide a more reliable and accurate estimate of claims backlog. This slide summarizes the maximum liability for unpaid claims submitted by all hospitals and affiliated physician practices in North Carolina. If every denied and unpaid claim, and there have been 872,581 claims submitted since July 1st of 2013, if all of these denied and unpaid claims were paid in full, the maximum estimated liability to medicaid would equal 54,456,704 in whole dollars and you can see the estimated state share. And while FRD did not consider other providers in their calculations because the hospital association survey did not include other providers, we were able to take this a step further and look at

Speaker: Over the claims for all other providers there are 800, 813 claim to other providers and every other claims and unpaid ?? 2013 would paid in full the maximum liability required to dedicate will equal 64.8 millions and i made state ?? of that over 9700 providers submit claims to medicate all of those provider have been considered in these numbers and to summarize to maximum liability to ?? for all one million 673,693 duplicated claims that were submitted denied and remained unpaid since July 1st 2013 of all of those were paid in full the maximum liability to medicate 100 million state share 40 million previous experience indicated a majority of the claims are not eligible fr payment had would not be resubmitted and would not be paid if they are submitted we cant ?? but I'm assured well over half of the claims will never be paid and claims these are submitted ?? and have denied once and not have been payed since they has denied that summarized end of analysis ??, Speaker Changes: Thank you Mr.Chairman ?? you'll be happy to know that think i just resolve the problems we all incorrect email address ?? few questions, Speaker Changes: and my understanding is that the ?? major 1014 is 74.4 million dollars ?? may have 2013 ?? Mr.Chairman and the committee we did not receive the email ?? with you as pointed they have a wrong email address ?? services.It an email to state budget yesterday,yesterday evening we found an error in one of our calculations and will tel you that we ?? we would appreciate to review the numbers in slot ?? information we have in our analysis,if we find if we have an error we will be happy to fix that confirmation provided to the party i would also like to pint out that the provider survey information is only one component ?? we provided in general assembly we gone into details for analysis we would be happy to that again we only have information from hospitals ?? the hospitals are the only group pointed out to investigate scenarios to in extend we have to ever extend the impact of pending times of hospital ?? by the fact that we did not include any money associated with other providers we have pending claim ??, Speaker Changes: Steve you do you have a question or comment, Speaker Changes: ?? is had you have one question ?? the information from Carolina health system indicated that this is ?? would this be h net amount to sort of medicate no to do bill charges that our understanding from information that we have provided to us really from Carolina health system, Speaker Changes:and my understanding is that the ?? major 1014 is 74.4 million dollars ?? may have 2013 ??,

that difference, I would interpret that as build- [??] [SPEAKER CHANGES] Doesn't the email refer to this as total dollars state and federal medicaid? [SPEAKER CHANGES] Right. So it's total dollars calculation. He is not attempting- [SPEAKER CHANGES] Well, but I believe he refers directly to state and federal medicaid. [SPEAKER CHANGES] It's billed to medicaid. It's medicaid accounts receivable. [SPEAKER CHANGES] In the information that was provided to fiscal research on this particular chart, it was very specific that these were recorded at net, which is the net amount due from medicaid not bill charges. So I guess if this is in fact net due from medicaid and not bill charges, to write this down further to the 20 to 25 percent number that you're using but also tend to understate your estimate. [SPEAKER CHANGES] Okay, if this is a billed amount, it needs to be netted down. They do not expect payment of that amount in full, I have with me here the printout of all of the hospitals and affiliated claims that are pending, and in this report the number due to Carolina's Health is significantly less than that, and it's similar to the taking 25% of the billed amount. So that's something we can reconfirm, but hospitals- I know of no hospital that can anticipate what medicaid is going to pay. Hospitals bill their normal rates and expect to be paid the medicaid allowable. If you start trying to anticipate what medicaid is going to pay you, you may bill less than what could have received, and you're going to be paid less if you bill less. So hospitals normally bill their full rate, and expect medicaid to pay the allowable. [SPEAKER CHANGES] Instead of going through the chair, we're going to have a lot of give and take today so I'm allowing that to go back and forth until it gets out of hand. I have a copy of the email, Mr. Gurley, that I'd like your comment on. It's from Carolina Healthcare, it says that all amounts below our net- could you look at this and give me your comments on this? [SPEAKER CHANGES] [??] The email that says that all of the amounts are net- I anticipate- and I have received emails from this individual as well, but I am not aware of any hospital netting an amount to equal what medicaid is expected to pay them. [SPEAKER CHANGES] [??] [SPEAKER CHANGES] Steve Owen, fiscal research. Just have a couple of comments. I did talk directly with Mr. Gumbar who confirmed that these were net amount due from medicaid. I spent over 27 years in hospitals as a CFO or CEO. I can assure you that every month, I calculated what was actually due and recorded in that receivable. In every hospital I ever worked in. [SPEAKER CHANGES] And I also spoke with this individual who's a CFO, and I don't have that interpretation of the numbers, I also have a printout of all of the claims that have been billed by Carolina's healthcare, and they are included in the totals that I gave you at the end of my presentation. [SPEAKER CHANGES] Alright, if you have a- conclude your presentation, we're gonna have some questions from the committee. [SPEAKER CHANGES] [??] [SPEAKER CHANGES] Oh okay, alright. Excuse me. He's not- presentation is not complete. Mr. Chairman, if we could real quick- [SPEAKER CHANGES] [??] [SPEAKER CHANGES] Solve this question, is Mr. Gumbar here, or is somebody from the hospital association here to answer the question? Seeing no one. [SPEAKER CHANGES] We've got somebody. [SPEAKER CHANGES] Is anyone here from Carolina Medical? [SPEAKER CHANGES] Cody's here. [SPEAKER CHANGES] Cody Hand. Welcome. [SPEAKER CHANGES] Good morning, Cody Hand from the hospital association. I will happily answer any question you've got. Mr. Gumbar is not here, by the way. [SPEAKER CHANGES] The question is, is this a net number or is this a billed number? [SPEAKER CHANGES] I'm under the impression that what we submit to medicaid is net. Mr. Gurly is correct that the final number is the state's share of what the hospital anticipates recieving. I will have Mr. Gumbar clarify

That force though. [SPEAKER CHANGE] Mr. Chairman? [SPEAKER CHANGE] Yes Sen ?? [SPEAKER CHANGE] I Believe Misses [Kimble 00:05] here representing Carolina Medical, could we hear from her please? [SPEAKER CHANGE] Miss Kimble. [SPEAKER CHANGE] I’m not Misses Kimble, I’m Martha Ann McConnel with Carolina’s Health Care System. Mr. Gumbar confirmed that it’s expected payment is the number. [SPEAKER CHANGE] Okay. That’s a whole dollar. [SPEAKER CHANGE] That’s state dollars. [SPEAKER CHANGE] Let’s go through the chair so we can make sure everyone hears the response. What was your response Mr. [Hurley]? [SPEAKER CHANGE] I was asking is it expecting state dollar. The email specifically says it includes state and federal share. [SPEAKER CHANGE] I think that was in an earlier part of the email but the number that we have is 17.5 expected state dollars. [SPEAKER CHANGE] Okay this is saying 41.7, what I was looking at. So that is the total? [SPEAKER CHANGE] Right [SPEAKER CHANGE] So the total expected is the 41.7 and a third of that would be? [SPEAKER CHANGE] Right at 17.5. [SPEAKER CHANGE] It shouldn’t be that much, okay. Well again, we do have the documentation of all of the claims. That’s similar to what we said. [SPEAKER CHANGE] Mr. Chairman? [SPEAKER CHANGE] Yes. [SPEAKER CHANGE] I have an additional question. It was eluded to the fact that this email is a part of the email. Has it been redacted in some way? [SPEAKER CHANGE] Not to my knowledge sir. I haven’t seen the whole email that was sent to Mr. [Girly]. From this distance I don’t know that it was redacted but I can’t say that it wasn’t. [SPEAKER CHANGE] Do we know whether or not, I’m sorry Chairman, do we know whether or not this was the whole email or just part of it as our staff didn't receive it? [SPEAKER CHANGE] I’m glad to forward you to entire email. [SPEAKER CHANGE] Alright thank you. [SPEAKER CHANGE] I can’t attest to whether that’s the whole email or not. [SPEAKER CHANGE] Alright, further questions? I hear a voice. Representative Tucker. [SPEAKER CHANGE] Based on Mr. Pope’s statement that there’s additional presentation, are we going to go through the entire presentation, is that his wish? Then we are going to get bogged down and not be able to ask Mr. [Girly] questions as a committee an hour later from now or can we do it now? [SPEAKER CHANGE] No, that’s what we’re doing right now. We’re asking Mr. [Girly] questions and then we’re going the rest of the presentation. [SPEAKER CHANGE] Okay, I have questions. [SPEAKER CHANGE] Go ahead. [SPEAKER CHANGE] Mr. Chairman, Mr. [Girly], what is your number that you project? Is that $41 million dollars in state dollars that is owed in a check, right, that’s due, is that what I’m hearing? [SPEAKER CHANGE] My interpretation of this slide is that there’s $41 million dollars more in accounts receivable at Carolina’s Health Care as of May of 2014. $41 million more than there was May 2013. [SPEAKER CHANGE] Excuse me Mr. Chairman. In your presentation did you have a number that is owed to hospitals now? Since that’s the most reliable information, what was that number? [SPEAKER CHANGE] All hospitals and affiliated positions, the maximum estimated liability if every claim that has been filed and not paid since July first of 2013, if they were all paid in full, the total liability to Medicaid would be $54,456,000. The estimated state share of that is $18.5 million. [SPEAKER CHANGE] Follow Up. [SPEAKER CHANGE] Follow up, that $18.5 million is where I’m going with this. What the hospitals are owed with their data systems, and I know you have a law background, a pharmacy background, and you ran a business. You know what your receivables were on any given day and with the sophisticated system of the hospitals they can pretty much within 24 hours come up with the most pertinent up to date information there is. I received information from just two hospitals, just two, that says they are owed by the state, just two not Vidant or any of the other big ones, again just two hospitals, $28.5 million dollars that they are owed, state dollars, which blows your 18 million out of the water. I don’t understand why…

...physical staff, OSBM, whoever is trying to get this, we're just trying to get an agreement of numbers. Hospitals can provide that information fairly quickly. At least I was able to get it from two, and you've heard Carolinas Healthcare state that they're owed $17.5 million in state dollars. That blows that $18 million. I can add another $11 million for Novant and we're at $28.5 million. So unless we survey and find out pertinent real-time information from hospitals, I don't see how you can, sir, substantiate those numbers based on what I received just last night. [SPEAKER CHANGES] I would call upon Mr. Cooper with DHHS and he is the one that is in charge of this. He is able to track the 1.6 million claims that have not been paid and document where it's due and the total amounts and the likelihood of the difference between what hospitals expect to be paid and what they eventually are paid. [SPEAKER CHANGES] Mr. Cooper. [SPEAKER CHANGES] Sir, one more follow up, Mr. Chair. [SPEAKER CHANGES] Sure, go ahead. [SPEAKER CHANGES] I was the Chair of a hospital for eight years. They bill net dollars, what they're expected to be paid. There's no funny money there. It would be like you billing for half of a prescription and saying that's your receivable. That's not it, you bill for the whole prescription. I'm not here to banter back and forth, I'm just saying that hospitals should be able to provide this General Assembly, OSBM and physical research, clean up the date, real-time numbers to substantiate that and I have two that blows it out of water by $10 million. Help me. [SPEAKER CHANGES] I don't know which two hospitals you're...yeah, that'd be great. [SPEAKER CHANGES] First of all you heard $17.5 million from Carolinas Healthcare just now, so that means you only got $500,000 left there. And then Novant's owed $11 million in state dollars, that's $28.5 million. That doesn't count Duke and Vita or any of the rest of them. And if you take NC track's numbers and you think they're the gospel with all the trouble we've had those guys. Tony, I mean, Mr. Pruitt, I cannot imagine a man with your background being able to stand there and substantiate $18 million when it's blowed out of the water. I can get you that data, sir, I can back it up. It is real-time and if you want me to go to finding it as a part-time legislator and call all these hospitals which you or our physical research or anybody else could have already done and talked to Gumbar, talked to the CFO's like I did on two, then you can find out exactly the information and be able to give us real numbers up there so that this General Assembly, the House and the Senate, and the House is placating more to your numbers than what physical research says, and that's a chasm we find ourselves in. We could find out a real number from our hospital partners here and be able to substantiate that. But this, right here, you're already $10 million in the hole and I ain't even gone to the rest of the big ones. [SPEAKER CHANGES] Mr. Gurley, you want Mr. Cooper to respond? [SPEAKER CHANGES] Well, yes, but first let me, I have been invited and met with the individuals there and they were originally claiming $70 million owed. That turned out to be, and it is owed to them, but it's a cost settlement. It's not claims. So their experience, and I'm not here to defend NC tracks, DHHS can do that. But Vita, you specifically mentioned them, they are very happy with the level of their accounts receivable, except for the cost settlement, which they are definitely owed $70 million and that's in the budget to be processed. And they are not behind in claim settlement and that's something I think that maybe missing in this discussion. We're only focusing on an increase in their accounts receivable this year over before NC tracks. Hospitals always have a certain level, just as you saw on the Carolinas Healthcare, we were focused on the difference, the increase in their accounts receivable. So a lot of the hospitals are quoting numbers that they're owed and they are definitely owed that but that's a normal amount of receivables. [SPEAKER CHANGES] Mr. Chair, one follow up. [SPEAKER CHANGES] All right, one follow up. [SPEAKER CHANGES] You know we do have a member of the House who formerly ran a hospital in Winston-Salem that's available to clear up net and claims and whatever, right here amongst us. If you want to ask him a question about how he ran his hospital, which is consistent with today the way hospitals would run if you chose to ask him. [SPEAKER CHANGES] We can come back to that if we need to. I think it's pretty clear where, how it's supposed to be billed. Mr. Cooper, did you want to respond to any of that? [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Tucker, I think that Mr. Gurley hit the nail on the head when he was talking about...

When we deal with hospitals, which we deal with every day, we hear numbers – they’re owed x amount of money or whatever – and then when we get in there and start dealing with the CFOs or the building manager, what we routinely find is that they’re lumping all the things, whether it’s settlement or dish payments or whatever in there, and when we get down to the actual NC ?? claims data, we’re usually very close to where they are, so what I’m saying is I can’t speak to the numbers that are being shared with you, but what I can tell you with complete certainty is in terms of what’s been paid to the hospitals and what’s been denied, we have accurate data on both of those fronts, and I would remind everyone that so far, we just finished our last check-write for this fiscal year and we paid 10.3 billion dollars, and this is very much in line to where we were last year at this same time, so what I would actually say, we have lots of detailed data, we can get together with the individual hospitals, and I’m confident we can sit down with them, look at the denied data and approved data and get to a very good place in terms of an agreement on where things are. One more thing I’d add is back to Mr. ?? point, when we looked at what’s submitted and what’s actually paid out, the numbers tend to be, and we have the data to back this up here, when hospitals submit their account receivables or their actual claims, they routinely fall in the 20 to 25 percent range in terms of actual payout, and we have very convincing, compelling data to that point and happy to share that, and I believe hospitals here that do this every day would tell you that they don’t have a high expectation, much more than 20, 25 percent of what they submit actually getting paid, and anybody from hospitals that’s here, I’m sure it would be good for them to speak up on that front. [SPEAKER CHANGES] Senator Tucker, is your mic on? [SPEAKER CHANGES] No sir, but I wish it was to respond to Mr. ?? [SPEAKER CHANGES] Well Senator Hise has his hand up. Do you want to respond? [SPEAKER CHANGES] No, let Senator Hise go ahead. That’s fine. [SPEAKER CHANGES] He said he doesn’t want to. He said he wanted you to. [SPEAKER CHANGES] Well I want to be the one to ask any questions, but I’ll just respond. I’ll have a question later. Thank you. [SPEAKER CHANGES] That’s fine. Any other questions of the committee? Mr. Pope. [SPEAKER CHANGES] Thank you, Mr. Chairman. Just one quick note on… [SPEAKER CHANGES] Please everybody check your mics and see if your mic’s on. [SPEAKER CHANGES] Mr. Chairman, I did want to clarify in regards to Steve Owen’s OSBM HHS ?? that he left the Department of Health and Human Services, Joint and General Assembly last year. I want to note that an apparently errant email was sent by the north Carolina Hospital Association with the wrong email address. I think that’s one of those cases where he just typed in an email address, up pops an old one at that particular point. Mr. Chairman and members of the committee, my next comment before we move onto the backlog in applications, this comment’s more for the general public who may be listening to this screening because we have a lot of knowledge and use a lot of terminology. I think the overall context that needs to be kept in mind is that Medicaid, for the whole dollars, Medicaid claims are paid for whole dollars, which includes both the federal dollars, which are going down by the state, and the state share, and an approximate rule of thumb is about one third, 34 percent as to state share, so when going through these numbers and amounts and discussions, you need to always distinguish between total dollars versus the state dollars into information billed, is that the whole amount that the provider is billing and what’s the state’s share of it, and then when you get detailed calculations within the numerous spreadsheets we go through to make sure that the multiplication and division is right to go back and forth between state dollars and whole dollars, and Mr. Chairman, I’ve already spoken to Fiscal Research Division yesterday and today. This is an unusual process to be having these discussions in public hearing, though we’re glad to do that. We received most of this information Tuesday afternoon, had a brief meeting with Fiscal Research Tuesday afternoon. Yesterday we received a request about 11 am to appear this morning, so unfortunately we do not have the normal process or the changing information with Fiscal Research Division, and like I said in my opening remarks, poking holes in each other’s numbers and trying to arrive at more certainty, and in particular as a businessman – I’m a hospital retailer – very much we all understand, we really emphasize this. Any business, any hospital, any provider is always owed money that they have been billed but not yet received.

When we talk about backlog, we’re trying to determine the amount, the difference between how much is owed this year versus last year or a normal year, the excess amount, especially an extremely high excess amount, being called the backlog – that difference between what’s normally billed and pending but is not yet paid versus additional amount, and yes, Senator Tucker, we all share the frustration on information and data. That’s why I also said in my opening remarks, we all agree upon that, but if you think it’s complicated on the backlog of pay, wait until we get to the applications. The Division of Health and Human Services provides Fiscal Research with data worksheets including the comparison of Medicaid enrollment data between 2013 and 2014. I know you cannot read this chart unless you have the hardcopy printout, and this is just one snapshot in time of that enrollment data, and we had a very productive discussion with Fiscal Research Division on even how you treat these numbers and the historic numbers, but one of the columns is a starting point, and the earlier version provided the Fiscal Research Division last Friday had in the May 13 pending applications, 168,888 now. That was previously 166, 694, so that number’s gone up slightly. Now just like with accounts received, there are always pending applications, so depending upon what the pending applications are, you’re going to use an average for the previous year. There were approximately 50 thousand plus pending applications last year, so routinely there are 50 to 60 thousand pending applications. Then we have processed fewer applications this year. We have a separate chart that’s provided, and Mr. Speaker, we got lots of charts on that thumb drive that highlight this, but basically the state processed fewer applications at the beginning of the year, especially January, February and March, than we did last year, in part because, as has also been well-discussed previously, the catching up on the backlog on SNAP and other issues, but beginning of May and April we start wearing those claims down, and then we also have increased pending applications, although enrollment has increased, so there is actually… Mr. Chairman, I did not even try and put this on a spreadsheet on my presentation, but here is an example, one spreadsheet that shows I think the collaboratively effort, and again poking holes. This is the detailed spreadsheet worked at by both OSBM, DHHS and Fiscal Research Division. The left hand column’s actually numbers provided by the Department of Health and Human Services and worked on by them, including Rita Dimling, who’s here today, and the right hand columns were worked on by Fiscal Research, trying to do an analysis of that application. Now based on the allocations, Fiscal Research Division had a starting number for the pending application of 180,110, versus 166,698 we had previously provided. That addition was due to a category called the “changed, not transferred”. These are the number of applications that are received by the federal exchange that are due to be transferred to the state of North Carolina. Earlier that was given a higher number from CMMS which in turn was then provided to Fiscal Research Division, which is what Fiscal Research used to get that 180,110. As of yesterday, that number has been revised down by CMMS to 19 hundred applications, which is 168 thousand. So again, this is because the information, numbers we get change, and these numbers came not from NC Tracks or NC Fast on the applications side but from CMMS and the federal exchange. That shows the challenge that we have. Now this is wordy, and we have spent, gosh, months on this issue, and that is that the current information does not allow the current identification of the woodworking effect. Again, the woodworking effect was to be the numbers who were not previously enrolled in Medicaid but would enroll in Medicaid, and then would go through the federal exchanges operating in North Carolina to the Medicaid system. Well only about eight thousand – excuse me, only about three thousand have been approved for the woodworking effect through the federal exchange operating in North Carolina. As we all know, the exchange did not work. People were encouraged to apply through the 1800 numbers, navigators assisted them, they were directed…

county social services. So the woodworking effect has been merged into over all applications, plus we had a unique explosion of duplicate applications of people who applied on the federal exchange more than once, or applied for federal exchange, and gave up, went to the county social service who still had that application there, so a very high number of rejects due to duplications of applications, and we have individuals already enrolled in medicaid. So they heard or were told they need to go to the federal exchange, or go sign up for medicaid althoug they're already on there. And Sen. [??] asked an excellent question on a meeting we had last month Tuesday, in that the screening is done constantly so the fact that we've knocked down those duplications early on, what does that say about the future? So those are all excellent questions, but unfortunately we do not have that detailed information. We don't have it, CMS, the federal government doesn't have it, and nor does fiscal research division to identify what that woodworking effect is. That is very important, because I was looking for my handout but in the last year's enacted budget on the committee report continuation, there were two items: One for the overall medicaid rebates, and one separate for th woodworking effect. The woodworking effect had a number in there of 69,683 new enrollees for this year, be funded at 49.6 million dollars. The next year's on the annualized basis, 12 months not just the 6 months of January through June 14, that cost 114.4 million. That part of the budget was done based on enrollment numbers, whereas the overall medicaid rebates was done based on a macro process we'll discuss later. Again, we cannot identify those who came through the county social services, whether they were traditional enrollees, or woodworking effect enrollees, because they're all merged together. But the total information on enrollment and the information we do have, in particular those that have come through the federal exchange, in the case that we're not anywhere close to the 69,683 and one of the reasons we believe the check right is lower, and we do have all the check rights now Sen. Tucker, is because the woodworking effect was not as great as we thought in total numbers, but also we do have a seperate calculation, and I believe Steve Owen has done this, although the potential backlog of claims, how many of them the woodworking effect, and fiscal research had a range of options of the backlog for ACA, sometimes it's a confusion between whats on ACA and the woodworking effect, a 22,000-24,000 backlog we're pending will ultimately be approved. I don't necessarily disagree with that number, but even given that number, and those that are re-enrolled, we are obviously well below that 69,683. Overall, based on fiscal research division's analysis, we're willing to go with on this, we again do not see any evidence we'll see the overall medicaid rebates for this year that the general assembly enacted of 557 million dollars, and then the additional funding for the medicaid, the woodworking effect as reported again in last year's continuation budget. So in part, and we'll go into detail in the next part of the presentation, we agree we think the general assembly, the Senate and the House, and the Governor signing law did a good job on the rebates last year, budgets for this year in general and for the woodworking effect, there are other specific issues that we can address and fiscal research division saying, including the transfer of children from health choice. And that part may be slightly underfunded, whereas we think woodworking is overfunded. But on that basis, I'm going to go to the next part of our presentation. [SPEAKER CHANGES] Sen. Tillman has a question before you go to the next part. [SPEAKER CHANGES] Mr. Pope, you're known far and wide as a budget guru. Your facts and figures are almost looked at sometimes as coming from above. But, we're basing on assumptions and you can come out with whatever you want on the end if you take this assumption or that assumption. We're all basing it on assumptions, and we really are working from the blind in some of these things and you can't tell me how many adults have pending applications and how many children. We don't know that. And one's high cost and one's low cost. But in any event, with these unknowns, and you're taking the least worst scenario, and we're 100 to 200 million dollars appart, and we will be after this, something is wrong. So if we're gonna try to come up with a number, and a good Businessman and a good budget man I just wonder if you can be comfortable with taking numbers that are the least worst

scenario versus the more conservative view that we're taking. The gaps to wide and what I want to know with all these unknowns why would we gamble on a two or three hundred million dollar deficit coming into an election year? I'm just looking at the fiscal side of this thing and I know that your usually conservative with your numbers. But what I'm saying is we're setting up a case, now your last three budgets that we've got have missed our projections by about a billion dollars of taxpayer money we've had to throw back into this program. Are we setting ourselves up again for a two or three hundred million deficit coming into the fifteen long session? And are you comfortable with us being that far apart and are you comfortable with these numbers? That's what I want to know. [SPEAKER CHANGE] Totally. [SPEAKER CHANGE] Senator I was planning to address those issues in the conclusion. I'll be happy to address them now but take a few of your points in order. Angela Taylor here is with NC Fast. A particular point was we cannot distinguish the woodworking effect from the cause in part of those enrolled through county social services. We do have a detailed breakdown and analysis, multiple spreadsheets on the breakdown of the applications already processed make assumptions on the applications already processed what percentage of those pending. Applications pending means it's pending you haven't gone through it to classify it. I can have Angela Taylor provide additional detailed information or brief me on that. Now to get to your more fundamental question, and first of all part of your reference to your, it is absolutely correct that there has been three out of the last four years substantial gaps in medicaid funding. In 2010, 2011 under prior general assembly and prior administration the gap was $601 million. In 2011, 2012 the budget, I presume you were here and passed it had a $375 million gap requiring legislation senate bill 797 house bill 14 to offset that during the course of that year. Likewise in 2012, 2013 you mentioned your Governor McCrory was not governor yet and the budget was enacted in 2012 but that resulted in a $487 million gap which yes this general assembly and the governor we had a deal with the ones that came in office had addressed that gap with legislation house bill 980 and house bill 336. So twice in the last 2 years this general assembly has voted on medicaid budgets without a balance. Now that the good news is, we didn't have to do that this year. There is good news. We do believe and agree there is a backlog in claims and applications but as already been indicated and I think everyone is in agreement, we're going to have approximately $70 million in cash to carry forward to next year to take care of this years obligations. ?? I'm talking about state dollars again, ?? between state and whole dollars. So that is the good news. We've not had to do that. You did pass a responsible budget last year and the governor has done a good job administrating that budget and controlling the costs where we can, though there are still many uncertainties. So that is good news and good information that we need as a starting point. Second vote in regards of rebased lectures you just asked me should we use the most conservative numbers? Respectfully senator, I think the worst case, well look at ?? if the worst case is this general assembly and the governor signs into law you use the number from the governor office state ?? management HHS the house the under funds medicaid what is the worst case? Unfortunately, The worst, this is a bad case. The bad case is we'll back here next spring in May or June like we were in 2013 and 2012 asking for additional legislation to authorize to use state resources to pay and make up the medicaid backlog. We've done that before. Presumably if this year is a normal year we'll have reversions here today. You've been given, we've already lowered down our estimates of what revenues will be. We'll have other collections of revenue. So senator Tillman the worst case is the governors recommendation is the house position is accepted rather than the senate position is we'll be back here next year using state resources to pay for it. Now then, lets say that we take the senate position and fund medicaid at two, three hundred million dollars more, what is the worst case then? You've over funded it and have a surplus next year. But senator what is the cost of over funding medicaid? The cost in the senate budget is firing teacher assistants. Some 6 to 7000 dollars current teachers assistants who serve over 239,000 children in the classrooms would be fired. You'd unnecessarily fire them. You can't go back and rehire them, put them back in the classroom next spring. We find out Oh we over funded medicaid. The senate house pays for it's budget by changing the

eligibility laws. That would require not underfunding medicaid, but removing 5,200 aged, blind, and disabled low income residents from the medicaid safety net. 1600 of those patients with alzheimers or dementia currently being served in special care units. So the worst case is you overfund medicaid, and you underfund needed service for people currently eligible for medicaid. You'd also eliminate or delay medicaid services up to 42,000 people a year, when nearly 18,000 of those are long term care recipients. Now that's people served and touched during the year, there's updates on the discussion on the numbers of how many are served at one time. So Sen. Tillman, we need the general assembly of the Governor as a duty to properly fund medicaid at the level expected to be needed, with the worst case if that number is wrong, we have to come back and find what financial resources, or a interim bill, supplemental bill like we did in previous years, would avoid what's definitely the worst case, unneccessarily firing teacher's assistants on the job now, serving children now, unnecessarily laying off people removing their eligibility from medicaid, including those 1600 patients with alzheimers or dementia. [SPEAKER CHANGES] Mr. Chairman, Sen. Tillman, I- [SPEAKER CHANGES] One follow up- [SPEAKER CHANGES] -I see you have your finger on the button. [SPEAKER CHANGES] -one follow up and I'll stop with this line. You failed to say, Mr. Pope, that if we take our conservative figures, we'd have 300 million on the table to cut taxes or to put teacher assistance in classrooms, or to buy textbooks, or to fund teacher raises, you can do a lot with the cash. And I think we can take care of these needs that you've just talked about without making these bad choices now and probably running a 2 or 300 million dollar deficit. I'd rather face the cash on hand than the deficit. That's simply what I'm looking at. [SPEAKER CHANGES] Sen. TIllman I agree with you on that. That's when we get through the next part of the presentation, the governor's recommended budget because there is risk, did leak 50 million dollars, for medicaid risk reserve, which will fund about 150 millon dollars in total dollars, plus the governor's recommended budget left 100 million dollars unappropriated which could be used for medicaid. We left it on there unappropriated because that had been the practice in the past year, the beginning of this general assembly in 2011 and 2012's very irresponsible, and leaving unappropriated amounts, because it was necessary for medicaid shortfall. But that actually began a good leadin to what the governor's budget does recommend, that we can find common ground for the appropriate funding level for medicaid, the appropriate medicaid risk reserve for those contingencies, without incurring undue hardships. [SPEAKER CHANGES] And for that Mr. Chairman, on the positive side, [SPEAKER CHANGES] Mr. Chairman, I've got a question, [??]. Before we debate what the final budget looks like, which I think Mr. Pope wants to do, because there's no budget thats been passed that's in place, that's your opnion, becaue we're not negotiating a budget. What we're trying to negotiate is a starting point to begin a budget process. Now your comments want to dictate what our budget may do - that's not a final budget, you know that. And we can make decisions on how those dollars are spent when we decide on what dollars we have to spend. We haven't had that debate yet. What the debate is about is what's the beginning point on dollars. And we can argue about what cuts to make and where to make them, and we'll do that in the budgeting process that's been in place in this body for many many years. We'll do that. The question I want to ask my staff is on the application's backlog, we've got a 180 million dollar piece and Steven Susan- a 180 thousand dollar backlog, I kinda want to talk about the difference between our backlog and Mr. Pope's backlog. [SPEAKER CHANGES] Dave, you want to respond to that? [SPEAKER CHANGES] Steven, on fiscal research, the 13,000 difference came from documents I believe that OSBM provided last Tuesday. [SPEAKER CHANGES] Okay. Sen. Hise. [SPEAKER CHANGES] [??] [SPEAKER CHANGES] Excuse me, don't- do you want to respond? [SPEAKER CHANGES] Oh no, I was just agreeing- [SPEAKER CHANGES] I acknowledged in my opening remarks that the numbers change in CMS, which is the difference between 180,000 and 168,000. That was the change from CMS which Steve Owens did not have the benefit of when he prepared his numbers. And Sen. Brown, I agree, that we have obviously not passed the entire budget, there's a limited amount of money available throughout the budget and I was responding to Sen. Tillman's question on that regard. [SPEAKER CHANGES] Sen. Hise. [SPEAKER CHANGES] Mr. Pope, that was just your opinion. [SPEAKER CHANGES] Thank you Mr.- [SPEAKER CHANGES] Hold on, hold on, hold on one sec. [SPEAKER CHANGES] I do have- [SPEAKER CHANGES] Sen. Berger. [SPEAKER CHANGES] -a question. Mr. Pope, one of the issues we're trying to deal with is why there's a difference between the estimate that the fiscal research staff has for the

… log and what number either DHHS or the Budget Office has for the backlog. Can you tell us what number you are using in connection with the projection of backlog dollars of the claims – I’m sorry, of the enrollment backlog that exists? Are you in agreement with the numbers that our fiscal staff has or do you have a different number? [SPEAKER CHANGES] Mr. President, we are in general agreement on the numbers of the backlog applications, and again, we’re in agreement in part because that 180 thousand number again had a difference of a revised number from CMS. That’s the only difference in the numbers on that. Fiscal Research Division has an approach of providing an analysis, and again, that’s this long sheet right here. I’m trying to allocate what percentage of those are traditional Medicaid applicants, which have an approval rate of approximately 61 percent plus, and then a portion of that under the Affordable Care Act, different ways to describe that including woodworking, which has a lower percentage in the 40 percent plus range, and from that getting a projection on the number of people who will eventually be approved. We do not have any substantial disagreement I believe on those numbers. The next step is then to provide what is the cost of those applicants once they get enrolled, and there I will defer to Steve Owen to describe his approach on the PMPM, per member per month. At Fiscal Research’s request, the Department of Health and Human Services including Rudy Dimsling is here to try to look at their approach and do other approaches on that cost figure, but no, we do not have a different cost figure on that factor from Fiscal Research because that’s in part not the methodology we use, though we’re glad to receive the information. So if I could summarize, I don’t think we have a disagreement on the numbers of people. We don’t use the same methodology that Fiscal Research does in using that all for projecting a cost for it, and that’s why I’ve been trying to get to the rest of our presentation on methodology we do use, but I’m happy to answer further questions. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] What is the difference between your number and Fiscal Research staff’s number on the cost. If there’s not a difference on the numbers but there’s a difference on what percentage represents the type of Medicaid that would be awarded, what’s the difference in the cost on the two numbers? [SPEAKER CHANGES] Senator Berger, I personally, OSBM, does not have a cost number. If you’d like to, I’d be glad to bring up Mr. Dimsling. If you want to come back and reconvene, we can do the variations, get this up here and have a discussion on the various ways of posting cost data, but to summarize, we’re not disputing or arguing. I honestly think when you look at the total amount allocated in budget for Medicaid, we are approximately 2015 million dollars in total bill less on the check-write than what was budgeted. We’re approximately 70 million dollars in state dollars ahead in cash for that. We all agree and think part of that again is due to the claims backlog discussed previously and the enrollment backlog because we know that enrollment’s slowed down; initially those people will be there. Now allocating what the costs of those are, again, I can have Mr. Dimsling get here and you can have Steve Owens discuss that. They have discussed it, but we’re willing to go approximately with Steve Owens’ approach on considering that on what possible effect that will have on next year. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] I guess at this point it appears to me that there’s a difference but I’m trying to get to what that difference is, and maybe somebody from Fiscal Staff can help. Is there something that they need that would help bridge the gap or is there not a gap? I just don’t know. [SPEAKER CHANGES] Senator, I don’t think there’s a major gap on that particular component of issues. We’re talking about the enrollment backlog, what that number is, what the normal number is, and when they are approved, the percentage rate down between the various categories. I don’t think there’s a research on that particular component of it. [SPEAKER CHANGES] Susan Jacobs, Fiscal Research. [SPEAKER CHANGES] Mr. Chair, Senator Berger, members of the committee, I think that one question that we’ve had, members have routinely asked us about the Governor’s budget and the backlog estimation of 215 million dollars in the backlog calculation. I think the members would want to know – they’ve asked us what percentage of that or how much of that 215 million dollar backlog are you associating with the claims backlog if any, and how much are you associating with an application backlog, and how you arrive…

...that those calculations. [SPEAKER CHANGES] If I can have Mr. Patrick come up and give the presentation the Governor's recommended budget and then the House will start getting that issue and the methodology that we use. [SPEAKER CHANGES] Senator Hise, you want to ask you a question now? OK, we'll wait. Now you get to have all the fun. [SPEAKER CHANGES] Good morning to the Chairs and the members of the committee and to the public. My name is Pam Kilpatrick and I'm here with the Office of State Budget and Management. The next part of the presentation focuses on the Governor's recommended budge proposal. The Governor's recommended budget began with the enacted budget in Session Law 2013 360. What's reflected on this slide is intended to show growth in state appropriations invested in the Medicaid budget in an enacted law from $3.1 billion when the budget was enacted for 2012-13, to $3.6 billion, which is the amount of funding currently appropriated for Medicaid for the budget year that's being debated. Within that, there is a rebase factored in already of $434 million state dollars for the current year and $557 million for next year, which is a growth in the rebase alone of $123 million and overall increased state appropriations next year to this year of $146,168,972,000. The next slide, we show this to show the various components that have already been factored into the budget that is enacted in law and these are the assumptions that were made about 11, 12 months ago about what was expected to occur as a result of growth in the Medicaid budget, as well as what the effect on state funding would be due to some of the other payments that the Medicaid budget has to support. The legislature enacted increases in this budget for the rebase, for cost settlements, for contracts. In addition to the normal Medicaid growth, the enacted budget included funding for the woodworking effect of the Affordable Care Act. Referencing the numbers that Mr. Pope mentioned earlier, the budget funded 72,426,000 new clients for 2014-15, with a specific appropriation of $114,119,120,000 and that is a higher amount than the estimate for the current year. Also the legislative budget included funded to move Health Choice children, also a requirement of the Affordable Care Act, from the Medicaid program, from the Health Choice program to the state's Medicaid program. And there was a growth in funding for that enrollment adjustment to the Medicaid budget. In addition, there was funding for some work arounds dealing with the NC Tracks implementation and CCNC study, so we bring you to the total amount that the legislature enacted in adjustments, taking into account these issues that are being debated as to how to adjust them for next year going forward. Then there were decreases, and I won't spell each one out, but there were decreases from savings initiatives that were directed to the Medicaid agency to fulfill and those are listed under the decreases. And for the current year, they were estimated to total $147.3 million and for next year the savings, when they're fully annualized into the budget, were expected to achieve savings of $221.6 million. On the bottom line, again, reconciling to sort of where we're starting out...

...going into next year compared to the current year, there is enacted $3.6 billion for the Medicaid agency next year, or that growth that has been considered in light of these various factors of $146 million. When the governor's budgets was being developed, the information that was available at the time of budget development, was actual expenditure activity through March 2014. As is typically the case, we start with evaluating what's happening in the current year and trying to interpret what we're seeing that is happening and then we start diverging and making assumptions about what that means. With that in mind, and understanding that what happens in this year, is the basis against which a number of the assumptions about growth and mix and enrollment change, will occur. We started with 2013-14 and we did the following, as a collective group. And again, the Medicaid agency owns the development of the models that have been used in developing these numbers, and there has been the process of debating and trying to vet those numbers. The original assessment used actual expenditures through March 31st and an estimate of the fourth quarter expenditures and revenues to project where it was expected that June 20...June 30, 2014, within that, how would the resulted plan look. The forecast indicated at that time time, based on that set of data, that the Medicaid expenditures would be about net $205 million under budget in total spending. Or, if you calculate a third is the state share, an estimate of $70 million. Again, this was not a pm/pm calculation. It was not based on enrollment changes because, frankly, we didn't have that. So it's what a budget estimate would look like using where we've been, looking at three years of prior March year-to-date. Three years of history of how the fourth quarter typically looks if there's ever a typical year in Medicaid. And attempting to create an expectation for the full 12 months. Under-spending at that point was estimated to be that net number. That net $205 million. That number was assumed to be a backlog. The underlying assumption, starting with the enacted budget, was if that was a good set of assumptions that we collectively made coming into this year, then there must be a reason that spending is lagging or falling behind the planned budget. We attributed that, at that time, to answer the question of how we came up with a backlog number, it was the difference between where the enacted budget spread over 50 weeks of check writes lead us to believe that when we finished June, we would come up with money left on hand. We assumed that related to the questions of providers not being paid or citizens not being timely or promptly enrolled in the Medicaid program. The unspent funds that were projected to be remaining at June 30, 2014, were recommended in the Governor's budgets up to be retained, regardless of whether we debate a carry forward or an appropriation of the general assembly, to be retained for Medicaid liabilities going forward so that that money could be used to liquidate that potential for the backlog due to provider claims delay and/or enrollment impacts. The recommended budget, again for emphasis, did not differentiate between the claims processing and enrollment. We were not able to do that at that time. To update this committee since that was done, the Medicaid program has made the 50th of 50 check writes for the state fiscal year. That would be the final NC tracks check write. That occurred Tuesday the 24th and in total, again based on that spread of the enacted budget, they came in $204 million.

Through the budget very close to what it had looked like in March when we looked at it. Came in very close to that. Now what we caution, we always say that the final balances and the final cash remaining at June 30 is dependent on the remaining payments that the agency will be making. They will not be holding payments or delaying payments, we are assured. And it will also be dependent based on the collection of receipts that come in through June 30. As we all know this budget uses state appropriations as well as a significant portion of total dollars of about $700 million in drug rebates and a lot of those come in in the month of, in the fourth quarter, and in June. So we will be watching that, and that should have a positive impact. So this slide has reflected that the allocated budget, the spread on the check write schedule that is fairly widely distributed, $10.1 billion. The actual check writes came in at 9.967 which placed the provider payment NCTracks payments to the providers at $204 million under budget. Another update is another filter that a state budget office would look at to measure where we are, would be to look at what we have as cash on hand. So what this slide is, is a DHHS estimate that they’ve prepared. The next slide will be actually what’s in the bank and what’s on hand. But we included this so that you could see a couple of components of the cash. What this says on the bottom line of that, is right now DHHS is estimating ending the year at June 30 with $123,123,793. That’s pretty specific for a target, for an estimate. But that is their estimate and it’s based on a point in time. It was based on their estimates as of yesterday, and what it’s made up of, in their estimate, is $57 million as a result of those claims coming in under budget. It doesn’t match exactly because cash is the net of all payments in and out and all the receipts that come in and out of the budget code. But the next three items are important to highlight because this has been a question before this body previously. How the federal share of drug rebates are treated in Medicaid, how they are recorded and whether they’re attributed to state cash. In the current year, well let me finish this short block here, that represents 39 million and 13 million represent federal shares of this cash that will be carried forward so there is adverse impact in next year’s budget from having to re-pay a federal component of a rebate that’s collected in the current year. We had been working with the state comptroller’s office, have been collaborating with your team here, looking at one first the appropriate accounting method for how to deal with these receipts, but the $13.7 million, we’ve had some communication as staff back and forth about whether or not there is some money in this cash that is actually has a federal component to it that hasn’t been identified. So it’s line item in this presentation before is, and it says on disposition receipts carried forward assumed to be 100% federal. In short, briefly what it is, is it’s a recoupment. A provider payment was made by NCTracks, it was recouped for one reason or another, it goes into a bucket and you have to determine what’s the state and federal share of it. We expect there’s a state and federal share but in the abundance of caution we’re itemizing it as 100% federal so that we don’t overstate the cash position. Two other notes at the bottom of this slide, briefly. There were, because we did work with OSC and our partners on the appropriate accounting methodology for federal shares of drug rebates, we point out that based on the method that was used last year, this year’s budget had to absorb the impact of $64.1 million of a repayment to the federal government for drug rebates that were collected in June of last year and use state appropriations out of this year’s budget to catch that up. And we’re not benefiting by June of this year having any ?? offsetting impact to it. And also, the state had to make, this budget will reflect the HHS budget for Medicaid will reflect what they call hardship payments also related to NCTracks, CSE. Those are made 100% state funded. They ultimately will earn

Some federal match, and so this years budget has had to absorb the whole payment. Next years budget will benefit by getting two-thirds of that back once those claims are properly adjudicated, and the general fund can benefit from that. This is sort of the stuff that budget geeks look-up; this is the cash management as of this morning, at some point early this morning. And I include this because it shows you the original appropriation by this body, adjustments that were directed; that would be the distribution of state wide reserves is on the left hand column: adjusted appropriation. The appropriation balance in the vernacular is money that is still in the saving account and hasn't been moved to checking. To be used for the medicaid budget. So, it was money appropriated by the general assembly, the state budget has not allocated because it has not been needed thus far. And then on the right hand side, all those gross' and nets', come down to a current balance on hand, again, of one-hundred and twenty-five million dollars in the checking account today. As the agency has to spend the balance of this week and on into the first week of July; wrapping up payments, making adjustments for federal draws, and doing the final accounting around the medicaid budget. Estimates for the year, that is being discussed here for the next year. No adjustment was made in the governors' budget for what they call their fund eleven-ten , eleven-o-one, their administrative fund. Because we done make adjustments for state positions, staffing, payroll, or rally costs in a ?? process so that was omitted. The funds that relate to claims administration cc and c and other provider payments were reviewed; using various different scenarios. We looked at the scenario of a claims backlog of a high of three-hundred and ten million, a low of two-hundred and fifteen. We looked at growth that ranged from three point nine percent to five point three percent to five point seven percent, and our result in doing that was producing, one, a negative ?? on the low end; and we were not comfortable with recommending a cut to the medicaid budget for next year. It created a high, on the other end, of about forty-one million dollars and somewhere in that range the fifty million dollar medicaid risk reserve was proposed to both adjust for the high and low, as well as, potential growth should it occur. Other more technical adjustments were made because we understood the base line of the current year would not be adequate for funding for next year because we would have to take into account, and the department did in their backup worksheets for developing this estimate, took into account the items you see on this page. I'll just point out a couple of them because it's a lot of words but most of what.. [SPEAKER CHANGES]: The high points would be great. [SPEAKER CHANGES]: Sir? [SPEAKER CHANGES]: The high points would be great. [SPEAKER CHANGES]: Yes sir. [SPEAKER CHANGES]: Yes ma'am. [SPEAKER CHANGES]: Most of what this, the couple that I would point out is that we assumed a lower ACA woodwork effect, that's the first bullet. I would point out that the inactive budget planned fifty-one thousand kids to go from health choice to medicaid, and ultimately that number was quit a bit higher. So, you'll see in these bullets that we both annualized as a normal ?? what you'd given us for the fifty-one but also assumed impact of the twenty-thousand additional children that were moved over. And finally based on this information ?? based on our high and low estimating, based on a total backlog combined that did not differentiate, the governor did not recommend a traditional ?? but instead felt that the five-hundred and fifty-seven million that had been enacted or the growth, net growth of one-hundred and forty-six was adequate when combined with medicaid risk reserve, and when combined with the remaining one-hundred million dollars on the bottom-line. Mr. Chairman that completes my portion. [SPEAKER CHANGES]: Thank you for that presentation. Senator Hise? [SPEAKER CHANGES]: Thank you Mr. Chairman. I guess to start this I just need to clarify one because I think that I've heard something that finally gave me an answer to several other questions that I've got. What your estimating as the backlog, both enrollments and payments, really doesn't have anything to do with either component it's just the difference between what we've actually spent and what someone's estimated we would spend. [SPEAKER CHANGES]: May I respond? [SPEAKER CHANGES]: Yes ma'am. [SPEAKER CHANGES]: Senator..

I am glad. Yes and no. What we attributed backlog was the difference between spread of the budget for claims growth and the actual plus estimated expenditure, but I would point out that it wasn’t based on nothing; it was based on the assumptions that were already in place for 13-15 for the growth being built in for ACA and the other components. [SPEAKER CHANGES] So if information, to follow-up – and this will probably be a series, if that’s okay, Mr. Chair. So if information from the hospitals indicated that at additional 500 million was owed to hospitals in state dollars, that would neither impact the spend nor the estimated budget spend, so those wouldn’t change that number. Now you would have to change if you completely changed methodologies because you saw it, but none of those factors will impact that number because it’s always been the difference between the actual and expected budget numbers. [SPEAKER CHANGES] Senator Hise, you are absolutely focusing in, zeroing in on the differences in approaches, but there’s not a disconnect there. Actually from our perspective, every time a check-write has been lower, and it’s been 205 million dollars lower over the course of the year, rather than that being good news, that just means the backlog’s bigger. It is absolutely crucial as a starting point, when you’re check-writes are lower than budget, why? That’s what you’re getting at; that’s what we’re getting at. One reason, and hopefully a good reason, is lower utilization at lower cost. We do think that is a factor. We think lower enrollment. We think that is a positive factor because we think the woodworking effect has been lower, but it is also due to backlogger claims, which we have discussed, and the backlog enrollment, so we then look at those enrollment figures and the backlogger claims as a reality check as to why we were below the check-write, and that’s where there’s uncertainly for all of us due to the data, that’s where there’s some disagreements on the number, which I’ll be glad to summarize once I get to my conclusion, but then I go by my reality check to see why are we lower than the check-write, and does that mean we’ll be lower next year, or next year’s going to be worse when we get called up with a backlog of claims, called up with a backlog of enrollments. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] And using that methodology, doesn’t it make the entire method incapable of identifying a shortfall in this year? Because what happens is at the culmination at which expected equals those, we’ve assumed that the backlog is now zero. [SPEAKER CHANGES] I’m not sure I ?? but let me try and answer your question this way. In a literal cash flow sense, there is no backlog this year because the check-write was lower than budgeted and we have cash on hand. We all agree and always know there are pending claims that have been incurred this year and billed this year which are not being paid until July, and then the question is what is the increased amount of claims that will be billed in July, and that’s why we did carry… actually, we recommended carrying forward the money in reversions and health and services to pay for it. The General Assembly’s taken the approach of recovering that money and appropriating the same dollars a second time, which different way to get to it. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] And I think but the problem with that comes if there is a problem resulting, which I believe that there is, from the implementation of two systems, one that’s not paying providers and the other that’s not processing applications that’s coming through. That risk cannot only be understated but could potentially not exist in another budget model that exists because all that we look at is how much we spend versus how much we expected to spend. If there is a fear in there that that risk is higher – that providers aren’t getting paid or that individual applications aren’t getting paid – all that will show up next year as a shortfall with everybody turning around and looking what happened, what it came through, but if we don’t make the budget associations and the reductions in the budget to account for that, they grow another year so when we’re making those cuts coming back in May, we’re not only having to make them at the levels we had to make them this year; we have to make them for the growth in that spending level as well. [SPEAKER CHANGES] Senator, the methodology you’re describing and concerned with is the methodology this Senate and House adopted last year. The document didn’t have my fingertips earlier. Everyone has seen this. It’s the money report from last year’s appropriations bill. This particular…

copy, it's page G4 of the annotated version that came out in the fall, item #66, medicaid rebates. I'll go ahead and read it: It provided medicaid funding for the continuation of the program as the current levels adjusted for changes in enrollment, ?? of enrollment consumption, new services and new policies, additionally rebates, it includes the impact of change in federal match, ?? in reductions, not fully implement during fiscal year 12-13, an extension of medicaid in former foster care children. It then gives a full amount and number, $434 million, for this year, and 557 million compared ?? increase to 557 million next year. There already is an increase in here. But Senator, this methodology which this Senate chose to adopt is what's been described as the macro approach. It does not have a breakdown of enrollment growth from normal medicaid activities, though it does have a separate item, #68 for woodworking affordable care act which does have a head count and does the calculation on that basis, which we know we're below now, and I think there may be a concensus even when the pending claims get processed we'll be below, and then a separate item for the transfer of the transfer of the ??. So the governor's budget starts with the budget enacted. [SPEAKER CHANGES] Just say on that, respectfully the method we are using for calculating this budget is the method the department was using to report to oversight, and every one of our oversight meetings in breaking down these categories show us what our budget risk was, and is a method they continued to use until OSBM began to write the governor's budget and then we went back to a different method. [SPEAKER CHANGES] I will let DHS address if you want them to, on what items were addressed at what point in time. But with the summer, I think that we're at- Sen. Hise I believe you and I are in agreement, We used one methodology in last year's budget, and the governor's continued to use that methodology, It should have what I call a reality check based on actual claims enrollment, and pending applications backlog and enrollment, I think we were again ready to go into my conclusion just off hand, if I may, I'll go with my conclusion or defer to the chair. [SPEAKER CHANGES] Do you want to follow up? Pursue that, Sen. Hise, or... We've run out of time here so before we do that we have one more presentation? [SPEAKER CHANGES] One page. [SPEAKER CHANGES] Oh, one page. Alright, go ahead and do your page, and then we'll... [SPEAKER CHANGES] ?? I know this is again too small for you to read, but this is our conclusion in trying to respond to some of the issues we just discussed in the letter from the co-chairman of the committee received last year, again, the good news is that on a cash basis, there was no short fall, no need for supplemental funding this year, we're carrying cash forward that can be applied to the backlog claims and/or enrollment. So that's the second part of the good news. So the unfortunate news that Sen. Hise and we all know, we got lousy information. We do have a new computer system, there is uncertainty. There's the uncertainty of the affordable care act. There's enrollees not being enrolled when ??. So that is absolutely the bad news. Here's one of the key differences: OSBM respectfully disagrees with the final medicaid budget as prepared by the general assembly's fiscal research division, because it had a claims backlog analysis that appears to include a major mathematical error treatment between the state dollars and whole dollars. It's not just the nature of Carolina healthcare or other providers as a starting point. The calculation's done on that and we look forward to work with fiscal research to resolve what appears to be an error. But I will note [SPEAKER CHANGES] ?? all the way to the very beginning, page four. Thank you. Right here, you will see a fiscal research division memorandum that we recieved on the 24th that had original medicaid backlog calculation. On June 17th, 10 days ago when this was revised on the 24th, the old backlog was $26 million. That got revised upwards to $212 million on June 24th. Fiscal research numbers change, I understand they change, we're all getting new information. The governor's recommended budget was based on information we had through March that we had to go to print with in early May, though in fact when we predicted $205 million difference between the check write and the budget which is reflected of, includes difference in backlog, we were actually right on the point. But Senators, I think this is one of the key issues, its a facutal issue that can be resolved, between the fiscal research division and office of state budget management, and then renarrow the differences between the House and the Senate. Absolutely is one of the crucial issues

... that needs to be addressed and I think can be resolved, and I’m sorry I just went past my end, but going back to there, you also have the written statement, and I do think that Senator Berger and members of the Senate, we are close on the application backlog analysis of different approaches on PMPM, but as far as the numbers, I think we are very similar there, so that’s not a major difference. I also ?? asked about responding to a backlog increase of 151 million dollars, but due to the lack of detail, I could not identify that number in the materials we were sent. It didn’t say whether it’s talking about cumulate backlog, applications and/or claims… We just couldn’t address that. If we can get more information, that would be try and address that. In regard to 250 million dollar figures, absolutely, we do endorse the Governor’s recommended budget. So far we’ve proved right by confirmation of how much we thought the final gap would be between this year’s budget and the check-writes on the actual revenue, and right on amount of cash we’d be able to carry forward, and again, the methodology in funding’s good. Senator Hise, whilst anticipating your question, the methodology in funding level is based on the appropriations as to 2013, Senate Bill 402 and the committee report which I just referred you to, and again, as ?? indicated because there is risk and uncertainty, repeating myself, the Governor’s recommended budget has 50 million dollars recommended to risk reserve and we left 100 million dollars un-appropriated. If the Senate agrees and we can work with correcting errors with Fiscal Research Division, if we’re correct or if some middle ground there, on a factual basis, I really do think that the Governor and the Senate may not be very far apart on numbers. I think we may actually be much closer than we think, and on behalf of the Governor, OSBM does look forward to continuing to work with both the Senate and the House for a balanced budget that meets the needs and priorities of the citizens of North Carolina without incurring unnecessary obligations, and we very much look forward to the continuing professional working relationship between DHHS, OSBM and the Fiscal Research Division. [SPEAKER CHANGES] Thank you Mr. Pope for your report. Senator Tucker, we’re trying to wrap this up. Do you want to go ahead and ask a question real quick? [SPEAKER CHANGES] No sir. I just want to make a comment. Mr. Pope and your staff, I appreciate you being here. I hope you’re right. I want you to be right. It would be my pleasure after four years of being a Senator to be able to pass a painless budget, one that has virtually no cuts and everybody gets most of what they want, but I do hope you’re right and I do respect what you’ve done here for the Senate, and the press says we’re here to trade barbs; no, we have a disagreement in methodology and numbers. There’s nothing about trading barbs from my standpoint. Thank you. [SPEAKER CHANGES] Thank you, Mr. Pope. Appreciate it. Now Fiscal Research is going to take about five minutes to make a few comments, and then we’ll conclude with a question from Senator Rucho. Hopefully the House Appropriations will bare with us just a minute. [SPEAKER CHANGES] Mr. Chair and members of the committee, we were asked early on this year, Fiscal Research, to prepare a range, since we could not provide a forecast due to data limitations for best and worst case scenario. This year is significantly different from last year, as you’ve heard from State Budget and you’ve heard from HHS because of the issues with the two systems they’ve implemented. We feel like in Fiscal Research, looking at actual data and looking at cash surplus is a risk, a very high risk if you’re trying to say… if you want to equate a cash situation with an actual budget situation, and so what we’ve attempted to do was say “Here’s the actual budget we have. Does it makes sense or are there other factors that could be contributing to why we have this excess cash on hand?” Is it because providers have not been paid timely? Is it because applications have not been processed timely at the local level? So these are things that you build into your worst case scenario. It’s not an absolute, we don’t know that those are the absolute cases, but it’s something that you build into your analysis if you want to make sure you provide all the information you need in providing the General Assembly with a worst case scenario, so that’s what we’ve attempted to do. We’re happy to look at our calculations and get back together with State Budget and follow-up if we need to with the General Assembly on our calculations. We would like to, Mr. Chair, talk about areas where we respectfully disagree with State Budget. [SPEAKER CHANGES] Do we have questions of the committee of Fiscal Research? Steve. [SPEAKER CHANGES] Steve Owen, Fiscal Research. Mr. Chair and members of the committee. What I’ve been asked to do is really highlight those areas where there are major differences. In terms of 2013-14, I think clearly the biggest area of difference is the backlog, and how those are calculated and what the ultimate numbers are. The importance of that number, the significance of that number is that the 2013-14 spending is the basis for the 2014-15 rebase and budget.

so we go into, in terms of a base spending level, the difference between the fiscal research worst case and the LSPM backlog, with some 248 million dollars of difference. So that's the base difference of where we start. The second area of difference is when you look at the growth factors. Fiscal research assumed a 1.1% growth at enrollment, and a 4.2% growth in utilization, based on CMS accuarial information and forecasts for the futre. LSPM used a range of 3.9 to 5.7, which is an effective rate of 4.8. So we start with a lower number, and we're growing it and fiscal research's number is growing at a higher rate. So you've got this one lower number with LSPM and a lower growth rate. In terms of annualized budget reductions, LSPM is slightly more aggressive in terms of their assumptions around budget reductions and how they will affect next year, about 11.5 million dollars difference in terms of state dollars. A large area of difference is the woodwork. We assume in the fiscal research worst case a cost mixture of 59.1 million, LSPM assumes a cost of 11 million dollars, so there's a 48 million dollar difference in that number. There's also in the fiscal research worst case, a $5.5 million impact for presumptive eligibility, and then there are also two factors in the fiscal research worst case around assumptions around a changing mix of enrollment, and then there was a more expensive average enrollee, as well as changes in a provider utilization of practice patterns, and result in response to reductions in rates. The terms of the change in F-map were pretty much the same. But those were the major differences when you look at what LSPM and fiscal research has done in the worst case scenario. [SPEAKER CHANGES] Thank you for that report. Questions to the committee? I know Sen. Rucho has a question of [??] with the hospital association. [SPEAKER CHANGES] Actually, Mr. Chairman, Mr. Hugh Tillson would be the one I'd like to speak with. [SPEAKER CHANGES] Okay. Mr. Tillson, Hugh Tillson, are you in the- There he is. [SPEAKER CHANGES] Alright, while he's coming up, on slide number 29 on Mr. Pope's presentation talking about hospital and affiliated physicians numbers, the estimated state share was $18.5 million, our goal Mr. Chairman and members of the committee, is to be sure that we have sufficient dollars set aside to make sure that the providers are taken care of, of course backlog, and applications for the enrolees and the like. And you know, we are sustaining about a 5.3% growth rate in the medicaid numbers. The concern that I have, and I'd like to direct a question to Mr. Tillson if I, Mr. Tillson, as you represent hospitals in this particular slide, Mr. Pope's 18.5 million is what was estimated to be the state's share of paying your expenses for your hospitals. Under I guess a yes and no answer is, do you believe that 18.5 is sufficient to carry the cost for the accounts receivable and unprocessed claims, yes or no? [SPEAKER CHANGES] I don't know the answer to that. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up question: The numbers that we get on our survey were significantly higher, I think we were looking at 134-160 million, but Mr. Tillson, it would probably be a very positive answer for us one way or another to know exactly whether that is a legitimate number to make sure our hospitals are protected and our patients are taken care of. I guess the question to you then would be, and you can go back to your CEOs, if that 18.5 is sufficient and if you have confidence in that number will you go ahead and ask your CEOs to sign a claims waiver so that it doesn't exceed that cost, and therefore we can be assured that this number is accurate? [SPEAKER CHANGES] Mr. Chairman, may I respond? [SPEAKER CHANGES] Yes you may. [SPEAKER CHANGES] Our interest is ensuring that number is right. I don't know whether 18 is right, we surveyed our members in April and asked them for their best case scenario and their number was higher than that, and that's what's in the data that we provided to your staff. We will go back and ask our members what we think that that number is, how we've already started that process as you might have anticipated given today's conversation, we hope to have those data sooner rather than later and we will follow up with you and your staff with the correct email addresses, and I sincerely apologize for that, and we will do that as quickly as possible.

?? I think that we’re all concerned about real numbers. I think we have one agreement that the numbers are in question at best, because of the computer problems of DHHS, and a prudent business person would take the worst case scenario, as Senator Hise alluded to earlier, not to find ourselves with a $200 or 300 million shortfall in the previous year as we’ve done in the past. And I would hope that the Senate would continue working with OSMB and basically come out with a real number that we can have confidence in when we sign off on this budget. Thank you, Mr. Chairman. [SPEAKER CHANGES] Thank you, Senator Rucho. Other comments to the committee? Senator Pate, are you getting ready to raise your hand? [LAUGHTER] [SPEAKER CHANGES] Thank you, Mr. Chairman. I just have a comment. Last night I was at an event in my district and there was a large crowd there. The Governor was there as a guest. And he and I had a few minutes together to speak with each other and of course the subject quickly came up to the budget. And I asked about some of the disparities between the budget that has been proffered by the Governor and the House and our recommended budget, and I asked about some of the information that we’ve talked about here today and his answer to me was not tell you what we do not know. And that was reiterated a couple times and I just wonder how that squares with some of the information we’ve heard here today. [SPEAKER CHANGES] Thank you Senator Pate. There certainly are lots of vagaries in these estimates but after this discussion hopefully we will be able to get together and resolve the differences so that we can come up with a budget for next year. Certainly the numbers for 2013 14 are vague and the numbers for 2014 15, we just can’t be sure of them. But hopefully we’ll be able to get together and work this out shortly. This committee is adjourned. Thank you.