North Carolina Kept Its Medicaid Promise. Washington Didn’t.

If you’re feeling somewhat duped, hoodwinked, bamboozled, maybe even a little betrayed, and like you’ve fallen prey to the ol’ bait and switch, you’re not alone. You had a deal – one you made in good faith, and the other party decided to change the terms without your consent. “It’s our prerogative,” they said. Check the fine print, again. It wasn’t them – but some other version of their likeness – who made the original bargain. That may be technically true, but it doesn’t make the outcome any fairer.

The Medicaid cuts in The One Big Beautiful Bill Act (OBBBA), signed into law in early July, didn’t just hit hospitals, health care providers, and Medicaid beneficiaries. The phased-in financing policy changes, if left unmitigated, will blow a hole in state budgets – North Carolina alone stands to lose at least $6.6 billion per year, $5 billion of which is federal funding.

That loss stems from changes to how North Carolina funds Medicaid expansion. Our approach relies on a “provider tax,” where hospitals agree to pay additional taxes the state uses to draw down federal funds. Those hospitals are then reimbursed through programs like the Healthcare Access and Stabilization Program (HASP), which helps cover the true cost of care.

By eliminating HASP – whether through gradually reducing the provider tax cap to 3.5% or by phasing down reimbursement rates from the average commercial rate to Medicare rates – the federal government undercuts the very mechanism we used to expand access responsibly. And HASP isn’t the only target: there will be other mandated costs to account for, too, like more frequent eligibility compliance checks and new work/community engagement requirements.

In 2023, North Carolina made the thoughtful, bipartisan decision to expand Medicaid, with assurances from the federal government and in partnership with hospitals and health care providers, who agreed to pick up the state’s share of the added cost. It wasn’t cheap, but it was the right thing to do. Yet, when other priorities arose in Washington, D.C., our careful work was brushed aside in favor of meeting revenue targets.

That wasn’t the stated reason, of course. No, you instead heard about rooting out waste, fraud, and abuse in the Medicaid program. It’s a great talking point, and you’d be hard-pressed to find anyone who truly disagrees with the concept. But real efficiency requires precision, not blunt force. In the end, what happened was less a targeted fix and more of a fiscal sleight of hand. The federal government was able to “save” money in the Medicaid program to offset other priorities, mostly by transferring the cost to a different ledger. Very little was done to reduce the need.

Meanwhile, our providers delivering care to North Carolinians, especially hospitals, are still recovering from the pandemic’s toll on finances and human resources. HASP funding and assistance provided during COVID-19 and other disasters helped many hospitals stay afloat and think more proactively about filling gaps in care and serving an additional 670,000 people added under Medicaid expansion.

Now, with cuts looming, plans for capital projects, new health care initiatives, and even maintaining current operations are in jeopardy. For our rural communities, it could even mean consolidations or closures. In any case, it’s North Carolinians who stand to lose the most.

So, what now? The temptation might be for the state to look to its health care partners to shoulder most of the new costs. But the reality is that under the OBBBA structure, new obligations will require a close examination of existing ones – including coverage for home- and community-based services, Medicaid postpartum coverage for new mothers, and maybe even expansion. We can’t make the same mistake as the federal government and think that balancing the budget spreadsheet matters more than real-world impact – or assume those we shift the costs to will be able to pay them.

Instead, we have an opportunity to come together, be fair to one another and those we serve, plan for the long term, and build a sustainable path that honors our promises to the people of North Carolina.

They may have passed the buck – but we can choose to stop it here.