NC Medicaid could face risk from congressional GOP ideas to fund tax cuts, immigration
When North Carolina lawmakers drafted a Medicaid expansion bill, they included a provision to end the program if federal cost-sharing terms changed to increase the state’s financial burden.
This safeguard now puts Medicaid expansion, which became law in the state in 2023, at risk, as congressional Republicans are reportedly considering changes to Medicaid to fund immigration initiatives and tax cuts desired by President Donald Trump.
Rep. Donny Lambeth, a Republican state lawmaker who played a pivotal role in passing Medicaid expansion in North Carolina, said altering the federal funding formula would lead to the program’s termination, barring health care organizations taking on the additional costs.
However, the state’s hospital association, which was also instrumental in securing expansion, has said it cannot absorb more financial responsibility.
Due to expansion, over 600,000 people have gained health care coverage in the state.
Still, a bill has not yet come to light, and Republicans hold slim majorities in both chambers of Congress.
“They’re circulating documents, and they’re circulating documents on about 1,000 different things right now,” said Peg O’Connell, a longtime health policy consultant and former chair of Care4Carolina, which sunsetted its advocacy work in the state following expansion.
“As the new president should be, he’s ambitious to mark his place in history with his agenda, and some of those things he wants are going to cost money ... So I think we’ll need to just see how this all plays out,” she said.
The state’s health and human services department said that while it was “monitoring potential federal provisions, formal proposals are needed to determine the specific impact to the state’s Medicaid program.”
“However, the current provisions under discussion would threaten the sustainability of key Medicaid programs and initiatives – things that North Carolina’s leaders made a top priority to invest in. These provisions could result in cuts to benefits, programs, or provider reimbursement in a way that would be detrimental to the people that receive these lifesaving services,” wrote spokesperson Kelly Haight Connor.
Additionally, a bill including cuts to Medicaid would likely face pushback from many Americans, lobbying organizations, and from states, including North Carolina, whose GOP-led legislature finally decided to expand Medicaid after years of initially opting out.
Currently, nine states — including North Carolina — have laws that require termination of the expansion if the share of federal funding drops, according to KFF.
But should a proposal that kills Medicaid expansion in the state come to pass, “all hell would break loose,” O’Connell said.
Details on congressional proposal
The New York Times and other outlets have reported that top Republicans in Congress are circulating a list of ideas to fund tax cuts and an immigration crackdown bill. Proposals include tariffs, taxing scholarship income, and altering Medicaid.
One proposed change involves aligning the federal reimbursement rate for adults covered under Medicaid expansion with the standard formula for the non-expansion population.
This funding formula, known as the Federal Medical Assistance Percentage (FMAP), determines the federal government’s share of Medicaid costs. For the non-expansion population in North Carolina, the federal government covers 65% of costs, compared to 90% for the expansion population.
State law says that should the percentage of Medicaid coverage costs for the expansion population covered by the federal government drop below 90% then the expanded coverage “shall be discontinued as expeditiously as possible but no earlier than the date the lower” percentage takes effect.
Lambeth said one of his “goals all along in getting expansion done was obviously to cover as many people as we could, but to make sure that the state, North Carolina, did not accept a new liability.” The trigger provision was critical for that goal, but if the formula changes, “there’s no way, under a new scenario, that it (expansion) would pass” again.
The North Carolina Healthcare Association, which represents hospital health systems, meanwhile, said that “even with 90% of the costs covered by the federal government, 10% is a significant cost to fund expansion: hospitals are taxed about $500 million every year in North Carolina.”
The funding formula changes — as well as other proposals being posited to change Medicaid — “would disproportionately affect the most vulnerable members of our communities, likely leading to worsened health outcomes, as individuals may forgo preventive care, medical treatments, or prescription medications due to cost,” wrote NCHA spokesperson Stephanie Strickland.
“Proposals that treat healthcare policies as a line item on a budget will not reduce healthcare costs. They will do the opposite, leading to delays in care that may exacerbate chronic conditions, resulting in higher rates of emergency room visits, which are costlier for both individuals and the healthcare system. These policies impact the everyday lives of North Carolinians and the healthcare professionals who are ready to care 24/7,” she wrote.
Other changes to Medicaid proposed on the congressional list include removing an American Rescue Plan temporary funding increase that was used to encourage non-expansion states to finally expand Medicaid, and establishing Medicaid work requirements for able-bodied adults, with exemptions for certain populations
This higher percentage for the expansion population was introduced through the Affordable Care Act (ACA) in 2010 under President Barack Obama.
Meanwhile, the ARP, passed under President Joe Biden, temporarily increased the FMAP by 5 percentage points for states expanding Medicaid after March 2021.
Over a decade of debate
As for Medicaid itself, it was signed into law in 1965, originally covering select groups before the ACA expanded eligibility to adults earning below 138% of the federal poverty level.
A lawsuit by Republican attorneys general made expansion optional, and some states chose not to participate. As of now, 10 states — previously 11, including North Carolina — have not expanded Medicaid, according to the Kaiser Family Foundation.
For years, Republicans controlling North Carolina’s legislature opposed expansion over cost concerns. However, the federal incentives, including $1.6 billion that came into the state from the ARP, softened opposition.
Disagreements between the state House and Senate over hospital competition and nurse independence delayed progress, but a compromise emerged in March 2023.
The final bill, signed by Gov. Roy Cooper, a Democrat, funded the state’s 10% share of Medicaid expansion costs by taxing hospitals. To compensate hospitals, lawmakers included a mechanism for higher Medicaid reimbursements, known as the “Healthcare Access and Stabilization Program.”
Lawmakers also included the trigger caveat.
