Whistleblower Allegations Surround North Carolina Medicaid Overhaul
Two former employees from North Carolina’s health department have raised serious allegations against the state’s top health officials. They claim that state officials used misleading information to gain federal funding for a major overhaul of the Medicaid technology system. This situation has come to light following a recently unsealed federal lawsuit.
The whistleblowers’ accusations date back over two years and include allegations of mismanagement and deception within the North Carolina Department of Health and Human Services (DHHS) and the federal Centers for Medicare & Medicaid Services (CMS). Although the federal lawsuit was recently dismissed, the former employees, Rob Morehead and Rhonda Keyes-Morehead, intend to continue their fight in court. They assert that their claims of fraud were not adequately addressed and believe the project has led to significant delays, costing taxpayers millions.
CMS has allocated funds to North Carolina and other states with the goal of modernizing outdated Medicaid systems. The intention is to streamline operations and make it easier to share information while also addressing potential fraud. Yet, Morehead and Keyes-Morehead claim they found evidence of a conspiracy within the state DHHS to submit fraudulent claims for federal funding.
In their complaint, the pair stated that the DHHS falsified documents to receive government funding, using misleading financial statements and engaging in non-competitive bidding practices. They also allege that CMS overlooked its own guidelines for approving funding, continuing to provide support even when they received insufficient responses to their inquiries about the state’s practices.
Additionally, the whistleblowers argue that CMS’s lack of oversight contributed to the failure of the software transition project, which has had a negative impact on healthcare delivery in North Carolina. They expressed concern that the CMS’s failure to properly regulate Medicaid has hindered access to quality healthcare for low-income residents.
In response to the allegations, a spokesperson for the DHHS stated that they have made progress in updating the Medicaid system. They emphasized their commitment to managing public resources responsibly and ensuring high-quality care, while also safeguarding taxpayer dollars.
The lawsuit was filed in Maryland, where CMS is based, and included a number of high-ranking state and federal officials as defendants, although many did not respond to requests for comment. The federal government primarily funds Medicaid, but states are responsible for administering the program that serves low-income individuals and people with disabilities. In North Carolina, more than a quarter of the population relies on Medicaid.
Plans for modernizing the state’s Medicaid system began in 2017, with the state receiving $120 million in federal funds by 2022 for planning and management. However, many of the scheduled upgrades are behind timeline, as indicated by a draft audit from 2022 that was not previously made public.
Warnings about potential cost overruns and service degradation were raised by a federal employee, who questioned whether state officials possessed the experience needed to oversee such a large-scale project. Initially expected to be finished by June 2024, the project’s new completion date has been pushed to the end of 2029—almost 13 years in total—making it significantly slower than similar projects in other states like Virginia and Texas.
Currently, North Carolina is paying over $600 million to a contractor to maintain its existing Medicaid system, and additional funding may be required to keep the outdated system operational past summer 2027.
Despite the setbacks, state officials have downplayed the challenges. The head of Medicaid, Melanie Bush, previously claimed that the complexities of the system are the primary issue, but she also noted that steps have been taken to address concerns raised by federal regulators and state oversight bodies.
Morehead, who claims that he was fired for voicing his concerns during the modernization efforts, has voiced his commitment to exposing the issues he witnessed, stating, “I blew the whistle. I’m still blowing the whistle and I continue to blow the whistle.”
The whistleblowers are now preparing to file a new lawsuit, determined to seek justice for what they believe are serious failings in the management of the Medicaid system.
