How the ‘Big Beautiful Bill’ may reverse Medicaid expansion in NC

Questions about what could happen to the Medicaid program in North Carolina if President Donald Trump’s domestic policy bill, aka the “Big, Beautiful Bill,” passes in Congress intensified over the weekend after US Sen. Thom Tillis, R-NC, announced on Saturday that he would not support it because of proposed cuts to Medicaid funding that would affect North Carolinians and hospitals in the state.

The next day, after Trump threatened Tillis with opponents in next year’s primary, Tillis announced that he would not seek re-election in 2026. Now an amended version of the bill has passed the US Senate and awaits House action.

Overall Cuts

The Congressional Budget Office’s (CBO) latest cost estimate shows that the bill would reduce federal Medicaid spending by $793 billion and that the Medicaid provisions would increase the number of uninsured people by 7.8 million, according to KFF, formerly known as The Kaiser Family Foundation.

KFF also said the Medicaid reconciliation provisions are numerous and complicated, but the majority of federal savings stem from work requirements for the expansion group, increasing barriers to enrolling in and renewing Medicaid coverage, and limiting states’ ability to raise the state share of Medicaid revenues through provider taxes.

tillis’ findings

In a press release on Saturday, Tillis said that he researched the bill and said it “would result in tens of billions of dollars in lost funding for North Carolina, including hospitals and rural communities.”

The press release included an eight-page report on the fiscal impact of the Senate’s proposed Medicaid policy on North Carolina.

According to data provided by the North Carolina General Assembly’s Fiscal Research Division, the North Carolina Department of Health and Human Services (NCDHHS), the North Carolina Medicaid Program, and the North Carolina Healthcare Association (NCHA), the state’s budget and hospitals would experience an estimated $32 billion impact over the next decade.

The report notes that this includes estimated impacts on the state and hospitals on total Medicaid expenditures over a 10-year period, resulting from select provisions in the Senate Finance Committee (SFC) proposal released on June 16.

Simply put, North Carolina would be on the hook for either raising taxes to make up for the lost funding or possibly eliminating coverage for the 673,478 people currently enrolled in the state due to Medicaid expansion.

“This will force the state to make painful decisions like eliminating Medicaid coverage for hundreds of thousands in the expansion population and even reducing critical services for those in the traditional Medicaid population,” Tillis said in the release.

The two impacts that Tillis said would have a devastating impact on the Medicaid program include:

• The combination of increased administrative costs and the provider tax phase-down, which could result in the termination of Medicaid expansion in North Carolina because existing assessment formulas would not cover the costs. That would include the bill’s new work requirements, which would require states to verify that able-bodied Medicaid beneficiaries are working, volunteering, or attending school for at least 80 hours a month. North Carolina would have to invest in new systems and hire additional workers to implement that requirement. However, the proposed freeze on provider taxes (3.5% provider tax cap) would prevent the state from generating revenue to pay for those systems and staff, and the work verification requirement would likely cost tens of millions of dollars.
• The 3.5% provider tax cap would eliminate all or most of the Healthcare Access and Stabilization Program (HASP), a system of state-directed payments to hospitals. Hospital assessments fund the state share of the HASP state-directed payments. North Carolina hospitals have received $4.9 billion of federal funds from the program this state fiscal year.

HASP was established as part of the state’s Medicaid expansion, designed to encourage hospital participation in managed care and maintain beneficiary access to care.

Tillis said HASP will be eliminated first after experiencing the funding reduction. This means that, effectively, everything else funded by provider taxes would be on the table for cuts or full elimination, depending on actions by the General Assembly. This includes home and community-based services, postpartum care for women 12 months post-birth, GME payments, rates for hospitals, and expansion.

“The provision in the bill that caps the states’ hospital provider tax rate at 3.5% would essentially negate the added hospital tax that North Carolina imposed to fund Medicaid expansion,” Brian Balfour, vice president of research for the John Locke Foundation, told Carolina Journal. “Without the ability to levy the added tax, the source of revenue the state needs to fund its share of Medicaid expansion would vanish, leaving the state with a difficult decision: find alternative revenue sources for the expansion population or discontinue coverage for them.”

He also points out that there is wording in the Medicaid expansion bill that mentions that cut in federal funding, which would essentially end the program in the state. It comes under SECTION 1.2.(a), Ҥ 108A-54.3B. Nonfederal share of NC Health Works costs, Section D:

“If, for any fiscal year, the nonfederal share of the cost of NC Health Works (Medicaid) cannot be fully funded through the sources described in subsection (b) of this section, then Medicaid coverage for the category of individuals described in G.S. 108A-54.3A(24) shall be discontinued as expeditiously as possible.”

Medicaid expansion was signed into law in North Carolina in March 2023, with the stipulation under the Affordable Care Act that the federal government would pay 90% of the cost for beneficiaries of Medicaid expansion, and hospitals would pick up the remaining 10% of the state’s expansion costs through a special tax assessment.

If that goes away, by law, NCDHHS is required to end Medicaid expansion.

But, under the bill, Balfour said that wouldn’t be the case.

“According to this June 24 CBO analysis,  the bill would reduce the federal share from 90 to 80% for coverage of the expansion population only for ‘any state that uses its own funds to provide coverage to certain immigrants through state programs,’” he said. “According to the Kauffman Family Foundation, North Carolina is not one of those states, and as such would not impacted by that provision.”

Balfour said with regard to concerns about lower Medicaid enrollment’s impact on rural hospitals, Congress has inserted a rural health fund of $15 billion to help address shortfalls.

The post How the ‘Big Beautiful Bill’ may reverse Medicaid expansion in NC first appeared on Carolina Journal.

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