This article was originally published in North Carolina Health News.
Efforts to prevent cuts that could significantly lower reimbursement to providers for services for North Carolinians on Medicaid stalled last week amid a three-way standoff between the state’s Senate, House of Representatives and governor.
Lawmakers are at odds over dueling proposals to fully fund the state’s Medicaid rebase, an annual budget adjustment that accounts for changes in the number of people enrolled in the government-run health insurance program, and the cost of providing their care.
In July, the General Assembly approved a stopgap “mini budget” that fell $319 million short of the $819 million the N.C. Department of Health and Human Services had requested for the rebase. Devdutta Sangvai, secretary of the department, later warned legislative leaders that NC DHHS would be forced to make “painful cuts” with “serious and far-reaching consequences” to adjust for the shortfall.
Providers across the state say those cuts would leave them with little choice but to reduce the number of patients they serve in the Medicaid program, which covers the cost of care for 3.1 million North Carolinians.
The cuts will take effect Wednesday unless the House and Senate reach an agreement or Gov. Josh Stein intervenes.
Impasse on hospital funds
The showdown began on Sept. 22, when the Senate passed a bill that would fund the Medicaid rebase and avert the looming cuts.
However, that bill also earmarked more than $103 million for the construction of a 500-bed children’s hospital in Apex.
Both chambers agreed to set aside $320 million in funding for the project, a collaboration between UNC Health and Duke Health, in the state’s 2023 budget. But the funds must be re-approved for the 2025 budget.
Members of the House now believe the money would be better spent on more pressing needs.
During an impromptu news conference after his chamber’s working session, Senate leader Phil Berger (R-Eden) defended the decision to tie funding for the hospital to the rebase. He also accused the House of reneging on the project.
“A deal is a deal, and they agreed to it,” he said. “They need to live up to what the arrangement was. They need to agree to this bill, and then we’ll go ahead and fund Medicaid.”
That didn’t happen. Instead, the House on Sept. 23 unanimously voted in support of a substitute bill that would fund the rebase but removes funding for the hospital.
“As time has moved on, the facts have changed. And so even if there was, you know, some sort of agreement that they feel like needed to be honored, the facts have substantially changed,” House Speaker Destin Hall (R-Granite Falls) said, citing inflation. “They’re not the same as they were back in 2023 because the value of $1 is not the same as to the Children’s Hospital.”
“We have at least five children’s hospitals in this state. We’ve got three or four really big ones,” he continued. “Obviously, if we felt like the children of this state were not getting health care, we would act. But the fact is, they are getting health care.”
Hall also talked about how the two chambers differed on a multiyear plan to lower taxes in North Carolina that has divided the two Republican-led arms of the General Assembly. The Senate wants to disregard state revenue triggers to push rates lower, while Hall is interested in a more cautious approach.
“The tax triggers no longer make sense,” he said.
Rep. Donny Lambeth (R-Winston-Salem) told NC Health News that the Medicaid funding bill approved by the House was “cleaner” than what the Senate had proposed.
“We don’t have a lot of things in it other than what we have to,” said Lambeth, one of the chairs of the General Assembly’s Joint Legislative Oversight Committee on Medicaid. “They want other things commingled in their bill, which we’re not going to take up.”
The House’s version of the bill has been sent to the Senate for a vote, but neither chamber is scheduled to meet again until Oct. 20 — weeks after the cuts take effect.
‘This was their moment’
Addressing a phalanx of TV cameras at Alliance Medical Ministry during a Sept. 25 news conference in Raleigh, Governor Stein, a Democrat, accused the state legislature of putting politics before people.
“The General Assembly has failed you,” he said. “But it is not too late for them to step up and do the right thing. I’d hoped that the legislature would realize that helping people get the health care they need is more important than grinding their political axes.”
In interviews with NC Health News, Berger, Lambeth and other lawmakers contended that the cuts could be avoided, or at least postponed, without the legislature’s involvement. They argued that NC DHHS has enough money and could use it to cover the shortfall while the House and Senate work to overcome their impasse once they return to Raleigh in earnest in early 2026 for their biennial “short” session.
“Making provider cuts is solely the choice of the department and how they choose to deal with budget surpluses or budget deficits, perceived or real,” Sen. Ralph Hise (R-Spruce Pines) said.
Rep. Donna McDowell White (R-Clayton) agreed, calling Wednesday’s deadline a “false date.”
“My constituents are very concerned about that, and what I’m telling them is that the money’s there,” said White, a registered nurse who serves on the Medicaid oversight committee. “October 1st should not even be on anybody’s calendar.”
Stein, however, insisted that the department has already stretched its resources to delay the cuts as long as possible.
He said NC DHHS had been cautioning about the possibility of rate cuts since May — “in meetings, in emails, in-person briefings, letters, conversations and press conferences, over and over until we were blue in the face.”
“We put off the cuts for a full quarter of this fiscal year,” Stein said. “We did not institute these cuts in July, in August or September because we knew they were coming back in September. We were as clear as a ringing bell that this was their moment to solve this problem, and we could put the cuts off till October.”
Further delaying the cuts, he said, will “just increase the pain.”
“The same amount of money is still going to be needed to address the shortfall,” he said. “They’ve had the opportunity to solve this repeatedly. This was their moment. We could not have been more clear; they had to solve this in September. They chose to put their political differences ahead of our people’s health.”
Behind the scenes, officials from NC DHHS have proposed a solution that would allow lawmakers to buy more time.
In anticipation of a stalemate between the House and Senate, the department floated the idea of pulling funds from the state’s Medicaid contingency reserve — a pool of money set aside to cover unexpected costs in the program — to legislative leaders last week.
Neither chamber has moved to pursue that option, although Lambeth said he wasn’t opposed to it.
“We have to be able to at least freeze the rates while we continue to work toward a longer-term solution,” he said. “We need to do whatever we need to do, whether it’s pulling from the contingency, which they could do, or the governor calling for a halt to the cuts while we continue to work through it.”
What’s at stake
Josh Dobson, president and CEO of the North Carolina Healthcare Association, said the cuts would be “incredibly significant” for the more than 130 hospitals and health care systems represented by his organization.
Nearly every provider in the state would see the reimbursements they receive for treating Medicaid patients reduced by 3 percent to 8 percent. Some providers, including nursing homes, acute care hospitals and psychiatric residential treatment facilities, would have their rates slashed by 10 percent.
Dobson said those decreases are likely to drive many providers — especially those in rural areas, where facilities often operate on thin margins and serve a higher share of Medicaid patients — to stop accepting Medicaid altogether. He worries that smaller, financially vulnerable providers will be forced to close down completely.
“My hope would be that the department would delay these cuts to allow time for more negotiations,” Dobson said in a recent interview with NC Health News. “It was a surprise that the department would go so quickly to 10 percent cuts without more discussion.”
Wesley Wallace, a professor emeritus of emergency medicine at UNC Chapel Hill, fears the cuts will trigger a “downward spiral of health care” across the state.
“If providers are not paid enough to provide care, if hospitals are not provided enough to pay their employees, they will close the doors or dramatically decrease their services,” said Wallace, one of several people who spoke during a Sept. 22 event in front of the state legislative building while the state Senate met inside. “In the case of Medicaid, if the already low reimbursements are decreased more, they will simply quit accepting Medicaid patients.”
His concerns were echoed by Jenna Beckham, an OB/GYN in Wake County who spoke during the governor’s news conference. She said the cuts could result in patients losing access to routine exams, prenatal care, cancer screenings and other essential services that she and others in her field provide.
“This will lead to longer wait times, delayed diagnoses and worse health outcomes for the patients of our state, especially for those who live in rural communities and who are already marginalized and underserved,” Beckham said. “The impact will be most severe for many patients who have complex medical needs, high-risk pregnancies and our most vulnerable children. Those who are already facing barriers to care will be hit the hardest.”
Other threats
The standoff between the House and Senate, and the governor’s unwillingness at this point to put off the cuts past Wednesday, come as other significant health care funding changes loom.
The One Big Beautiful Bill Act that President Donald Trump championed and signed in July calls for nearly $1 trillion in Medicaid cuts over the next decade, shifting more of the cost burden onto states. Those costs will be compounded by federal lawmakers’ failure to renew key Affordable Care Act subsidies offered during the pandemic, leading insurance companies in North Carolina and elsewhere to seek approval for rate increases that range from 6.9 percent to 36.5 percent.
Meanwhile, a new federal rule set to take effect in December 2026 will require Medicaid enrollees to prove they are working, attending school or volunteering for at least 80 hours a month.
Jay Ludlam, head of Medicaid for North Carolina, has said that implementing the work requirement will force the state to develop a costly, complex new platform to check beneficiaries’ employment status.
The OBBBA does not provide the state with any federal funding to create that platform. In fact, it reduces the amount of taxes the state can impose on providers — limiting the state’s ability to offset the work requirement’s cost.
Ludlam said the combination of the work requirement and lower provider tax cap will likely undo the expansion of Medicaid that North Carolina lawmakers approved in 2023.
Expansion increased the state’s previously strict income threshold for Medicaid, raising it to $21,597 for an individual or $36,777 for a family of three. This opened up the program to many low-wage workers who did not receive coverage at their jobs, but nonetheless made too much money to qualify.
More than 680,000 people, or about 22 percent of the state’s total Medicaid enrollment, had gained coverage through expansion as of Sept. 2, according to data from NC DHHS.
Ludlam said all of those enrollees are at risk of losing their benefits because of a financial “trigger” that the General Assembly placed in the Access to Healthcare Options Act — the law that expanded Medicaid. It includes a clause that discontinues expansion if the state is forced to pick up any costs.
The loss in provider taxes, Ludlam said, leaves the state with “few financial mechanisms to pay for” expansion, let alone the cost of checking the employment status of expansion beneficiaries, effectively tripping the trigger. Lawmakers will need to modify or get rid of the clause to protect expansion.
“Because of the changes in the federal One Big Beautiful Bill, state legislators need to act and pass new legislation so that nearly 700,000 North Carolinians don’t lose health care coverage or access to services,” Ludlam said during a virtual “tele-town hall” presentation on Sept. 24. “And the change does not require more spending.”
Alliance Medical Ministry, the site of the governor’s news conference, is a free and charitable clinic that provides care to working people who make too much to qualify for Medicaid but too little to afford private insurance.
In the coming months, Pete Tannenbaum, executive director of the ministry, expects to see an influx of newly uninsured patients.
“The downstream financial impact of this crisis will hit clinics like ours and hospitals very hard,” he told reporters. “Some people with chronic diseases such as diabetes, hypertension and obesity might then decide to forgo routine care that had been more accessible and only seek medical attention when they’re dangerously ill — decisions that can lead to more emergency room visits and treatment regimens that are far more expensive.”
“This is not just a financial crisis,” he said. “It’s a human crisis.”
Anne Blythe, Rose Hoban and Taylor Knopf contributed to this story.