North Carolina Medicaid Funding: A Critical Shortfall and Its Implications
By Grace Vitaglione
In a significant move for North Carolina’s healthcare landscape, the state legislature approved funding on Wednesday to address the rising costs associated with the NC Medicaid program for the current fiscal year. However, the approved amount fell short of the state Department of Health and Human Services’ (DHHS) request by approximately $81 million, raising concerns about the program’s sustainability and the health of its beneficiaries.
The Funding Breakdown
The DHHS had initially requested nearly half a billion dollars—specifically, $458 million—to meet the obligations of the Medicaid program, which serves low-income children, some of their parents, and low-income seniors. In contrast, the General Assembly’s “mini” budget allocated only $277 million in recurring funds, along with an additional $100 million in one-time funding. This discrepancy has left many stakeholders worried about the potential ramifications for the program and its beneficiaries.
House Speaker Tim Moore (R-Kings Mountain) indicated that any shortfall might not become apparent until 2025, when the legislature reconvenes and could potentially address the funding gap. However, the uncertainty surrounding future funding raises immediate concerns for those relying on Medicaid services.
Federal Funding Dynamics
A significant portion of North Carolina’s Medicaid funding comes from federal sources, which currently cover 65.91 cents of every dollar spent on the program. However, this matching rate is set to decrease to 65.06 cents next year. Such a seemingly minor adjustment can translate into a multimillion-dollar impact on a program as expansive as Medicaid. The DHHS has indicated that part of the funding request was necessitated by a projected $136 million decrease in federal dollars.
The remaining funds requested by DHHS primarily address health care cost inflation, which has been a persistent issue. The costs associated with managed care plan rates, provider rates, and necessary technology upgrades are among the factors driving the need for increased funding.
Navigating the Shortfall
With the legislature’s approval of a budget that falls short of DHHS’s request, the department is now tasked with finding ways to manage the Medicaid program within the constraints of the $81 million shortfall. This challenge is compounded by the transition from a state-run Medicaid system to one managed by large insurance companies, which has introduced additional costs and complexities.
One of the new initiatives requiring funding is the Children and Families Specialty Plan, aimed at serving over 30,000 current and former foster children and their families. Additionally, the department has contracted with an enrollment brokerage company to assist members in navigating managed care plans, further straining the budget.
The NC Healthy Opportunities pilots, which provide Medicaid recipients with access to essential services like food, transportation, and housing, may also face delays in their expansion due to the funding shortfall. Melanie Bush, deputy director of the state’s Medicaid program, noted that plans for statewide implementation could be put on hold.
The Legislative Process and Its Implications
In North Carolina, lawmakers typically establish a two-year budget in odd-numbered years, followed by adjustments in the second year. However, the General Assembly left Raleigh earlier this summer without making necessary budget adjustments, exacerbating the funding gap for Medicaid. As a result, Medicaid funds could begin to run low as early as spring, according to Rep. Donny Lambeth (R-Winston-Salem).
Senate leader Phil Berger (R-Eden) emphasized that the approved funding amount was based on estimates from the General Assembly’s nonpartisan fiscal research division. He acknowledged that disagreements between the agency and the legislature are not uncommon, but the reliance on nonpartisan staff for budgetary figures is intended to ensure objectivity.
If the funding bill survives a potential veto from Governor Roy Cooper, it will provide some relief to the Medicaid program, albeit insufficient to fully meet its needs. A DHHS spokesperson stated that the department plans to work collaboratively with partners to manage the shortfall effectively.
The Need for Increased Funding
The necessity for additional funding stems from various factors, including an increase in program enrollment, the rising costs of medications such as Wegovy, and higher payments to managed care companies. Furthermore, the need for updated information technology systems to support Medicaid and associated public benefits adds to the financial burden.
Senator Lisa Grafstein (D-Raleigh) raised concerns on the Senate floor about the potential disruption in continuity of care for Medicaid recipients due to funding constraints. She highlighted that individuals relying on Medicaid cannot simply dip into savings to cover gaps in services.
Moreover, the mini-budget fails to address the needs of nearly 18,000 individuals on the waitlist for the Innovations waiver, which provides essential Medicaid services for people with intellectual and developmental disabilities. Many of these individuals have been waiting for over a decade for access to the program, and last year, the legislature allocated funding for only 350 additional slots.
Conclusion
As North Carolina navigates the complexities of Medicaid funding, the implications of the recent budget decisions will resonate throughout the healthcare system. The shortfall poses significant challenges for the DHHS and the individuals who depend on Medicaid services. With the potential for a gubernatorial veto and the looming uncertainty of future funding, stakeholders must remain vigilant and proactive in advocating for the resources necessary to ensure the health and well-being of North Carolina’s most vulnerable populations. The road ahead may be fraught with challenges, but the commitment to providing essential healthcare services must remain a priority for lawmakers and the community alike.