NC lawmakers order halt to Medicaid cuts as budget stalemate continues

State House legislative leaders have instructed the state Medicaid program to suspend its plans to cut reimbursement rates and services in October, despite a shortfall in Medicaid funding in the stopgap spending plan lawmakers passed on July 30.

North Carolina Health and Human Services Secretary Dev Sangvai informed legislative leaders in correspondence on Aug. 13 that the shortfall, combined with program changes under congressional Republicans’ spending-and-tax cut bill, would require cuts of $319 million as of Oct. 1. As a result, he said, the state would have to reduce the amount of money it reimburses to health care providers who care for more than 3 million North Carolinians enrolled in Medicaid.

All providers would see a 3% cut to their Medicaid reimbursement rates, with some types of providers facing much larger cuts, Sangvai recently told lawmakers, adding that DHHS would begin notifying providers immediately.

Rep. Donny Lambeth, the House’s senior budget chairman, says the decision is premature.

Lambeth, R-Forsyth, tells WRAL News that he believed there was an understanding between the DHHS and state lawmakers that the legislature would reevaluate the program’s funding needs before any major decisions would be made about the rates. He vowed to fight DHHS’s plan.

“The General Assembly has always funded Medicaid and never experienced these arbitrary reductions in rates without oversight input,” Lambeth told WRAL this week.

He added: “In my 12 years of working on health issues, I have never seen the department jump to tell providers they will face major cuts when legislators’ oversight committees have not met yet.

Sangvai didn’t immediately respond to an interview request, but told WRAL Thursday that the cuts are "unavoidable without a fully funded budget."

"With limited options under federal rules," Sangvai said, "we are doing all we can to implement any necessary changes thoughtfully while continuing to work with lawmakers on securing the support needed to sustain critical care."

The stopgap funding measure lawmakers passed in July was necessary because of the budget stalemate between Republican House and Senate leaders over tax cuts and raises for teachers and state workers, leaving the state running at 2024 spending levels.

Every year, state health officials have to adjust the Medicaid budget to account for rising costs, changes in the number of people enrolled, and other factors likely to affect the program’s cost for the upcoming year. The process is known as the Medicaid “rebase,” and it’s generally included in the state budget.

This year, Medicaid leaders said the rebase needed for the next fiscal year would be $819 million. However, the stopgap spending measure supplies only $600 million, a 25% shortfall. Lawmakers noted at the time that they could still pass a bill that would allow additional Medicaid funding outside of a broader budget.

A DHHS spokeswoman said some of the $600 million will be required for administrative requirement, so the shortfall is even larger.

In the July debate over the spending measure, Rep. Lambeth said budget writers didn’t agree with Medicaid leaders’ projections.

“We've had staff scrub the numbers,” Lambeth said at the time. “We felt like at this point in our process, this was the best number we could go with, but we are continuing to look at the rebase number.”

Sangvai told WRAL in an interview on Aug. 6 that the shortage of funding could require cuts as soon as Oct. 1. He said receiving more rebase funding later in the year would help, but the program can’t base its annual budget on that possibility.

“The longer you wait to know how much money you're going to have for the year, the harder it is to implement cuts later on,” Sangvai said in the Aug. 6 interview.