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If anything in North Carolina has been run more ineptly than the State Health Plan, it ought to be shut down.

Doing away with medical coverage for 667,000 state employees, retirees and their families isn't an option, of course, so drastic action has been approved to save the plan. It includes an infusion of $250 million to keep it solvent through June 30, the end of the current fiscal year -- a down payment on a long-term taxpayer bailout.

Next, an overhaul is needed to put the system right and guarantee overdue accountability.

State Auditor Beth Wood's recent report was devastating. State Health Plan managers projected net income of $58 million during fiscal year 2008 and ended up instead with a net loss of $80 million. Administrative expenses alone exceeded estimates by $36 million.

One aspect of what went wrong was simple: The plan set premiums too low to cover the costs of medical services provided. Recently approved legislation plugging the plan's deficit will raise those rates.

But worse faults were uncovered. The plan operated in an irresponsible way, with the top executive even denying that financial projections should be revised when asked by legislative overseers for a status report last year.

The State Employees Association of North Carolina actually places more blame on legislators, who should have known the financial condition of the plan all along. The union pointed out that two earlier audits, released in 2003 and 2008, warned of problems.

There's blame to go around. The latest audit identifies incredible weaknesses in the plan's contract with Blue Cross Blue Shield of North Carolina. The contract is "cost-plus-a-percentage-of-cost," reimbursing BCBSNC for administrative expenses plus a guaranteed profit. There's no incentive to contain costs, the auditor said. Furthermore, the contract doesn't specify which costs are allowed, or how they should be measured. Plan managers didn't furnish BCBSNC cost data to their actuary, so making projections was a matter of guesswork.

Plan management has changed since last year, and current leaders accepted the auditor's findings and said they're making corrections. They're trying to amend the BCBSNC contract, which runs through 2013.

Whether these efforts are good enough can only be determined through better supervision. Auditor Wood recommended that oversight of the plan be shifted from the legislative to executive branch. The legislature should admit its failures and agree, but so far it's resisted. A proposal last month by Republican state Rep. John Blust of Greensboro to place the plan under the governor's Office of Management and Budget was defeated in a party-line vote, with all Democrats opposing the move.

This isn't a partisan issue. Auditor Wood is a Democrat. The governor is a Democrat. Legislative Democrats should not view this as a power struggle but a matter of competence. A part-time General Assembly has no business trying to provide oversight for a complex, multibillion-dollar health plan.

As for other changes, there should be no more cost-plus contracts, and all terms of future agreements should be openly examined. The existing contract was never even read by a contract attorney for the state plan before it was signed, the auditor said.

This is an alarming example of irresponsibility. It almost looks as if losing money was the intent.

That's intolerable. The State Health Plan is too important to be shut down, so it must be made well again.