The state legislature approved funding Wednesday to meet higher costs for NC Medicaid in the current fiscal year. But their number came in below what state health officials had been asking for — by about $81 million.
The state Department of Health and Human Services had asked for almost half a billion dollars to meet all of next year’s obligations for the program, which serves low-income children, some of their parents and low-income seniors.
But the General Assembly — which voted this week to approve their version of a “mini” budget document — only approved $277 million in recurring funds and an additional $100 million in one-time money to cover the requested $458 million.
The bill could be vetoed by Gov. Roy Cooper, but the legislature would be likely to override that veto.
(No state dollars are used to cover people who receive care as a result of Medicaid expansion. Money for that comes from different sources.)
House Speaker Tim Moore (R-Kings Mountain) said if there is a shortfall, it likely wouldn’t happen until 2025, when the legislature would be back in session and could take action to add in extra dollars.
Small changes, big dollars
The federal government pays most of North Carolina’s Medicaid expenditure, providing 65.91 cents of every dollar spent this fiscal year. Next year, that matching fund rate ticks downward to 65.06 cents for every dollar. In a program as large as Medicaid, even that small a change can make a multimillion-dollar difference.
Part of the money DHHS asked state lawmakers for is needed because the state will receive $136 million fewer federal dollars.
According to DHHS, the remainder of the requested $458 million is largely due to health care cost inflation.
NC Medicaid costs fluctuate each year, and DHHS forecasts how costs might change. They then ask the legislature for funding adjustments based on those predictions — known as the “rebase.”
Managed care plan rates, provider rates and technology upgrades are some of what drive Medicaid program costs, according to DHHS.
Now, the department is evaluating how to manage the Medicaid program with that $81 million shortfall and no additional funding for the costs associated with the Medicaid program’s switch from being state-run to being managed by large insurance companies.
Some other new costs include planning for a new Children and Families Specialty Plan, which will serve more than 30,000 current and former foster children and some of their family members.
On top of that, the department has a contract with an enrollment brokerage company that helps members to enroll in managed care plans. The department also manages multiple critical technology and operations contracts, which ease the administrative burdens on county partners, a department spokesperson wrote in an email.
Another impact could be to the NC Healthy Opportunities pilots, in which people on Medicaid can receive food, transportation or housing services, Melanie Bush, deputy director of the state’s Medicaid program, told NC Health News this summer. Plans for taking that program statewide may have to go on a back burner, she said.
Hashing out the budget
In North Carolina, lawmakers make a two-year budget in odd-numbered years right after an election. Then usually they come back in the second year of the legislative biennium to do budget adjustments and add money for desired projects.
But lawmakers left Raleigh earlier in the summer without making that second-year budget adjustment. Since no money was approved then, the gap was larger. Medicaid funds could have started running dry in the spring, Rep. Donny Lambeth (R-Winston-Salem) said at the time.
Senate leader Phil Berger (R-Eden) said the General Assembly’s nonpartisan fiscal research division came up with the dollar amount that the legislature approved for Medicaid.
“It's not unusual for there to be some disagreement between the agency and other folks, but this is something that we've relied on our nonpartisan staff to give us a number, and that's the number that's in there,” he said.
If the money approved this week survives a possible gubernatorial veto, Medicaid won’t be totally underwater, even if the amount is too little. A DHHS spokesperson said the department plans to work “collaboratively and transparently” with partners to manage the shortfall.
Why does NC Medicaid need more money?
People enrolling in the program, costly drugs such as Wegovy, increased payments to managed care companies and increased services are some other factors in the rebase requirement, Bush said.
Money is also needed to update the information technology support for Medicaid and associated public benefits, a DHHS spokesperson said.
Senator Lisa Grafstein (D-Raleigh) said on the Senate floor Monday that changes in the Medicaid system can disrupt continuity of care for people in the program.
“People who rely on Medicaid can’t just dip into their savings,” she said.
Grafstein also complained that this mini-budget does nothing for the almost 18,000 people on a waitlist for an Innovations waiver, which allows people with intellectual and developmental disabilities to receive Medicaid services that help them live at home. Some of those folks have been waiting for over a decade to get a slot in the program.
Last year the legislature added funding for only 350 more slots for the Innovations waiver.
This article first appeared on North Carolina Health News and is republished here under a Creative Commons license.
North Carolina Health News is an independent, non-partisan, not-for-profit, statewide news organization dedicated to covering all things health care in North Carolina. Visit NCHN at northcarolinahealthnews.org.
