With Medicaid cuts looming, NC Senate passes bill. Will the House back it?

The House and Senate are still at odds over funding for North Carolina’s Medicaid program, with provider rate cuts set to take effect Oct. 1 unless lawmakers act.

Both Republican-controlled chambers on Sunday night released separate bills addressing the Medicaid rebase — the funding required to maintain current services and provider payment rates. Both bills included various other provisions, including cuts to vacant positions.

But there is a key difference between the two. The Senate bill released includes funding for a pediatric hospital and rural health program. The House version does not have those items.

On Monday, the Senate passed its bill unanimously. It now goes to the House.

The News & Observer previously reported that the Senate and House, ahead of returning to Raleigh this week, were struggling to find a compromise on Medicaid funding.

The Senate bill — an overhaul of a prior version of House Bill 562 — would provide $103.5 million for the North Carolina Children’s Hospital and $105 million for the N.C. Care initiative. NC Children’s is a planned pediatric hospital network led by Duke Health and UNC Health. The NC Care Initiative is a rural health care initiative run through East Carolina University’s ECU Health, UNC Health and their medical schools.

Sen. Michael Lee, a budget writer, said in a committee hearing that people are relying on funding for both projects.”They’ve spent money on it, they’ve made plans on it, and we need to do it in addition to what we’re doing in Medicaid.”

Lee shared a story about his son, Sawyer, who was born in 2006. In 2010, after years of being told “don’t worry about it” in North Carolina, Sawyer underwent coordinated evaluations at Cincinnati Children’s and then, soon after, brain and spine surgeries. Lee said the difference wasn’t the skill of individual doctors, but the level of care at a major national center.

In 2023, both the House and Senate approved nearly $320 million over three fiscal years for the hospital and $420 million for the N.C. Care initiative. The more than $200 million in this bill, which comes from federal funds, represents what remains to be released, Lee previously told The N&O, calling on the House to live “up to the commitment.”

The bill would provide $690 million a year for the next two years to cover Medicaid needs, relying on the nonpartisan Fiscal Research Division’s forecast on needs. It would provide $49 million in ongoing state funds, along with $34 million in federal relief money, for administrative Medicaid costs. At the same time, the measure requires DHHS to draw up a plan by April 2026 to make Medicaid more efficient.

Sen. Lisa Grafstein, a Raleigh Democrat, said “it is no secret that the House does not agree with the way the Medicaid rebase is being done in this bill.”

She said she supported the children’s hospital funding but “I want to implore you all, the hospital is not going to get this funding any faster if we don’t fund the Medicaid rebase.”

She said people with disabilities are in a “panic.” People who have Medicaid and go to the doctor’s every so often may not be as concerned, but “someone with a disability who relies on Medicaid day after day after day, they may lose their provider,” she said.

The Department of Health and Human Services says it faces a $319 million Medicaid shortfall. Without more funding, the agency plans a 3% across-the-board cut to provider rates, with some facing deeper reductions. Such cuts could lead providers to stop accepting Medicaid patients or even close as a key funding stream dries up.

“My fear with regards to not having a clean rebase bill is again, providers will stop serving the Medicaid population,” Senate Minority Leader Sydney Batch said during floor debate. “We will see drops, we will see attrition, and we are going to see Medicaid die by 1,000 cuts.”

While Batch said she supported funding for the hospital, she offered an amendment to keep the bill focused on the rebase. It failed.

DHHS previously said the state budget office warned in May that Medicaid costs were climbing. By July, DHHS said $819 million was needed for this year’s rebase — up from the $700 million in Gov. Josh Stein’s January budget request. Lawmakers’ July mini-budget provided $600 million, but only $500 million went to the rebase after administrative costs, leaving a $319 million gap, according to DHHS.

Advocates, people who use Medicaid and their family members gathered Monday morning to call on lawmakers to fund the program.

Betsy MacMichael of Durham said Medicaid makes it possible for her 33-year-old daughter, Janie, who has a rare neurodegenerative disorder, to live independently.

“Medicaid is her health insurance, and it literally keeps our daughter alive,” MacMichael said. Through Medicaid, Janie gets help nine hours a day with cooking, bathing, taking medication, going to appointments and to her work as a consultant at a dance company.

Medicaid cuts would force providers out, leading to Janie losing her care, she said. “It’s like saying we’re not closing schools, but we are cutting pay to teachers, principals and cafeteria workers.”

Without help, “she cannot live on her own, work or enjoy her 30-something life. She would lose the independence she’s fighting so hard to keep,” MacMichael said. “We thought we had things in pretty good shape for Janie ... but now it feels like a house of cards ready to collapse.”

Stein in a letter last week urged House and Senate lawmakers to pass a budget — which was supposed to be enacted at the end of June — but said that in the absence of a comprehensive plan, funding for items such as Medicaid “cannot wait and demand your attention in your September session.”

The Democratic governor wrote that the state budget office and DHHS “strongly indicate” that an additional $319 million is needed to fully fund Medicaid.

Stein wrote that it was his understanding that General Assembly staff believe the amount needed is closer to $190 million and that he was “willing to compromise” at that number with a commitment to reevaluate in January.

The Senate’s bill also sets aside $1 million for the state auditor to review how counties are handling Medicaid eligibility checks.

To cover costs, the plan includes cuts, particularly to the state’s regional mental health agencies, known as Local Management Entity/Managed Care Organizations (LME/MCOs).

The bill requires these organizations to send back a combined $18 million a year for two years to the state. It also cuts $30 million a year for the next two years in funding for mental health, developmental disability and substance use services. To offset the reduction, lawmakers would redirect $14 million a year from the state’s opioid settlement funds.

The bill orders DHHS to eliminate vacant positions by January to achieve nearly $34 million in savings. It also requires shaving about $100,000 each per year from the Whole Child Health program and the Medical Eye Care program.

Meanwhile, the House bill — an overhaul of a prior version of Senate Bill 403 — is largely the same as the Senate bill in terms of funding, vacancy cuts and trims. The key difference is the funding for the children’s and rural programs.

Another notable difference is that it halts Medicaid coverage of obesity management drugs such as Wegovy beginning Oct. 1. Glucagon-like peptide-1 drugs for diabetes would remain covered. The change is projected to save the state $34 million a year. The House bill also requires $19 million in savings to be achieved via cuts to other state agencies, in addition to DHHS savings.

The oversight also goes further: The state auditor would conduct performance audits of county administration of Medicaid and the federal Supplemental Nutrition Assistance Program, also known as food stamps, with results due in May 2026.

©2025 Raleigh News & Observer. Visit newsobserver.com. Distributed by Tribune Content Agency, LLC.