CHARLESTON, W.Va. (Legal Newsline) - A growing number of West Virginians -- lawmakers, politicians and citizen groups -- say state Attorney General Darrell McGraw needs to be held more accountable for a gaping hole in the state's Medicaid budget.

By all estimates, that hole is about $3 million -- $2.7 million from a 2004 settlement with Purdue Pharma and nearly $447,000 from a settlement with Dey Inc. the same year.

The Centers for Medicare and Medicaid Services, or CMS, says McGraw wrongfully kept the money from the two settlements.

CMS provides the bulk of dollars West Virginia spends on Medicaid and feels it should be repaid when a lawsuit alleging harm to the Medicaid program results in a settlement or award.

The U.S. Court of Appeals for the Fourth Circuit agreed in August, ruling that McGraw wrongfully kept $446,607 by not classifying the proper amount of the $850,000 settlement with Dey Inc. as Medicaid recovery.

The $2.7 million withhold had been stayed while that case was sorted out, since the arguments in the two cases are identical.

The question isn't when state lawmakers will have to face the impending deficit created by the attorney general's mishandling of the settlement monies -- it appears McGraw is ready to accept a ruling that he shortchanged the federal government.

Both McGraw's office and attorneys for the federal Department of Health and Human Services signed a joint motion earlier this week to lift the stay that has been in place in McGraw's challenge.

The attorney general still has the option to appeal to the U.S. Supreme Court, but voluntarily lifting the stay could mean that he will not.

Now, state lawmakers are concerned about exactly how much they'll have to come up with to fill the void.

"We want to make sure the people who need those funds are taken care of," said state Delegate Mitch Carmichael, a Republican from Jackson County. "If it's finally adjudicated that we do owe those funds, then as good citizens we want to pay our part."

Carmichael explained that the federal government's withholding of funds -- which is a standard practice when CMS believes it's been shortchanged -- will definitely affect the state's Department of Health and Human Resources budget.

But he said he's not sure how much at this point.

The topic most likely will be brought up during the Legislature's budget hearings in January, he said.

So how does the state go about filling that hole?

Carmichael, the minority vice chair of the House Finance Committee, said the state has the money to make up those funds, if needed.

But some argue that McGraw should pay out of his office's Consumer Protection Fund.

Carmichael, who also serves as the minority vice chair of the House Economic Development and Small Business Committee, said he has considered it, but as far as he knows the monies in the fund -- which was bolstered by the two settlements -- have already been spent.

"It's something we can make up if we have to," he said of the deficit.

What's more concerning, he said, is that an individual -- in this case, McGraw -- has the power to appropriate the settlement monies in the first place.

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