After months of closed-door negotiations between legislative leaders and members of Gov. Roy Cooper’s staff, North Carolina will have a budget for the first time since 2018. 

Expanding the state’s Medicaid, a policy that has been a Holy Grail for Democrats and a non-starter for Republicans, continued to hold up negotiations and disappoint Cooper. 

Nonetheless, Cooper says he plans to sign the the $25.9 billion budget that lawmakers presented this week despite the absence of Medicaid expansion and several policy changes that raise constitutional questions about the separation of powers that likely will be decided in the courts.

“On balance, the good outweighs the bad,” Cooper said in a briefing with reporters on Tuesday. “It moves North Carolina forward in important ways, many that are critical to our state’s progress as we are emerging from this pandemic.”

The tussle over Medicaid expansion, along with disagreements over teacher pay, impeded compromise between Republicans leading  the General Assembly and the Democratic governor for more than five months after the start of the state’s fiscal year on July 1. Those were the same two disagreements that led to a budget stalemate in 2019, leaving North Carolina without a new state budget document since 2018. 

What made the difference this year was the COVID-19 pandemic and the billions of federal aid flowing from federal coffers to the state to facilitate historic changes.

Those funds are peppered throughout the budget, from $4.9 million earmarked for rural hospital improvements to $20.2 million to provide COVID mitigation and treatment in jails and prisons to $89 million in additional dollars for a program to provide funds for home heating and cooling for low-income North Carolinians. 

“There are critical funding opportunities in this budget that we must seize now, in this extraordinary time,” Cooper said, explaining his assent. “Many of those opportunities would evaporate if I would veto the budget.” 

Many parts of the state’s health care infrastructure will see infusions of federal funds from the American Rescue Plan, along with smaller provisions that often are painstakingly advocated for and negotiated among lobbyists and lawmakers. 

Medicaid transformation proceeds

While the budget does not expand Medicaid, it does create an 18-member joint legislative committee to study health care access and Medicaid expansion.

“While a study is some progress,” Cooper said, “real action remains painfully overdue, and I’ll keep fighting for it.”

The legislative study comes despite the fact that Cooper had created a similar study group, that included lawmakers, in December 2020 to examine expanding access to care. That group eventually concluded the most cost-efficient way to get more people covered was through expansion of the public program.

The budget allocates hundreds of millions for continuing to shift Medicaid from a fee-for-service model run by the state to one that’s run and managed by private managed care companies. 

Just over $430 million is designated to the Medicaid Transformation Fund over the next fiscal year; $133 million of that is to cover the costs of contracts, temporary staffing, and the state’s pilot to tackle social determinants of health.

Other costs associated with Medicaid include:

  • $4.3 billion for Medicaid payments, which is estimated to be about the same for the coming fiscal year
  • $49.2 million in Medicaid administrative costs and $33.3 million in Medicaid rebase, the calculation of how much above previous estimates it will cost to run the Medicaid program. The transition to managed care was done largely to rein in these two costs. 

Lawmakers made it possible for low-income parents whose children end up in the foster care system to remain on the Medicaid program. Often, these parents are struggling with substance use disorders, and once their children are removed from their homes, they lose the Medicaid coverage they gain as the parent of a low-income child. 

Advocates have successfully argued to legislators that keeping these parents on the program makes it possible for them to get into treatment and, eventually, regain custody of their children. This provision is likely to affect 3,000 to 5,000 parents annually. 

Private duty nurses and direct care workers, who are often paid through Medicaid, will see their wages increase. The budget creates a new minimum wage of $15 an hour for direct care workers at state-run group homes, those who work with people with disabilities and the elderly. Private duty nurses will see their wages rise to $11.25 every 15 minutes, or $45 an hour. 

The state will appropriate $274.8 million for Medicaid home- and community-based services, using funding from the American Rescue Plan. This will lead more slots to open up within for these in-home care services delivered to North Carolinians with disabilities. The move is the result of a decades-long legal fight within the state after a Supreme Court ruling found the state was in violation of the Americans with Disabilities Act by its overreliance on institutionalized care. 

The money is intended to help move people out of these institutions and into local and home-based care. By June 30, the Department of Health and Human Services must add at least 114 waiver slots to its Community Alternatives Program for Disabled Adults. The state is also supposed to add 1,000 new slots to its N.C. Innovations Waiver, which aids adults with intellectual and developmental disabilities, though the state gave itself until 2025 to complete that transition. 

Those on Medicaid will also see some changes. Copays for most adults will increase to $4. By Jan. 1, Medicaid plans must include coverage for orthotic devices and prosthetics when those are prescribed by a podiatrist. Finally, children on Medicaid who attend charter schools can now have those health care costs reimbursed by the program. 

Nursing homes, adult day care get boost

Budget writers proposed in the bill much more stringent oversight of the state’s four privately managed veterans nursing homes and a broad reconsideration of the treatment of retired military in the facilities. A proposed new commission and an outside consultant would both examine the homes, after 18 months in which neither the state nor PruittHealthcare, their managers, offered comprehensive accounts of the COVID-related deaths of 39 veterans in the four facilities in 2020.

The nursing homes come under the supervision of the state’s Division of Military and Veterans Affairs. An assistant secretary for veterans affairs would be liable under the proposed legislation to file a comprehensive report on the state veterans homes program each year to the division and to legislative committees, including taking a look at “monies received and expended, statistics on residents in the homes during the year, recommendations… as to the program, and such other matters as may be deemed pertinent.”

The newly formed commission would meet each quarter. 

The proposed changes followed a series of detailed NC Health News stories detailing Pruitt’s fees for managing the nursing homes, their refusal to offer detailed accounts of the COVID-related deaths, and coverage of an existing commission’s decision to renew the company’s contract in the face of two lower competing bids.

Among other aging-related changes including boosts in state payments to assisted living facilities, residents of North Carolina nursing homes whose stays are paid for through state and federal funds would get their first boost in years for a personal needs allowance. Each resident would basically receive $70 instead of $46 per month, for items including transportation to church and elsewhere, snacks, cigarettes, cosmetics, and any other commodities, small or large. Long a priority for residents and advocates, the increase also came after extensive NC Health News coverage, including the account of an eastern North Carolina woman who said her sister, a resident, had sold sex in exchange for snack money

Adult day care would also get a hand up under the proposed budget. The service has become the only such resource bound by law to remain within a fee structure imposed more than 10 years ago. Changes in the law would allow local governments to set fees for adult day care within the context of local need and economic conditions. The service has remained a frequent life-saver for residents and caregivers, and research shows that having access to adult day care services prevents much more expensive institutionalization.

COVID changes the game

For years, local public health departments have decried their thin funding for beefing up communicable disease surveillance and response. COVID finally punctuated that point. In response to the pandemic, the legislature is directing $36 million to these local health departments over the coming year to both backfill prior spending and provide more services during the current fiscal year. 

The budget also directs money coming from the Centers for Disease Control and Prevention to bolster disease prevention, as well as to add school nurses, psychologists, counselors and social workers. A key line in the provision states that any federal dollars should be used to add new personnel, not supplant current state spending. 

GOP lawmakers have tried several times to curb Cooper’s emergency powers during the pandemic.

Last week, key Republican lawmakers announced that negotiations with the governor over the spending plan had broken down. This week, they presented a plan that has elements that Cooper said he disagreed with, such as including a policy to curb a governor’s emergency powers in 2023.

During his Tuesday appearance before the media, Cooper indicated that lawsuits would be filed against the legislature over what he said were “unnecessary and politically motivated missteps.”

“By signing this budget, I want to make it clear that I do not consent to the constitutionality of these provisions,” he said. 

A boost for child care industry

The pandemic has highlighted the importance of child care for many families. It also has exposed the thin margins on which the industry operates as well as the low wages that many child care workers receive.

The state budget attempts to address some of the longstanding problems by increasing the reimbursement rates for pre-K and child care centers by 2 percent the first fiscal year and an additional 2 percent beginning in July 2022, when the next fiscal year begins.

In October, Cooper announced that $805 million in federal aid sent to the state through the 2021 American Rescue Plan would be distributed through the North Carolina Child Care Stabilization Grants program.

For the next 18 months, grants of anywhere from $6,000 to $60,000 will be distributed to centers to help boost teacher salaries and benefits, make improvements to buildings, and cover unexpected losses caused by the pandemic.

At the time, Susan Gale Perry, deputy secretary at the state Department of Health and Human Services, said: “We cannot rebuild from this pandemic without investing in early childhood.”

The pandemic also exposed mental health struggles among adults and children. The state budget includes some $9.8 million in additional funding for the hiring of an additional 115 school psychologists in public schools to bolster the 362 psychologist positions currently funded.

Water quality issues receive torrent of funding

After a years-long drumbeat of news reports about industrial chemicals fouling the state’s waterways, the budget agreement takes steps towards funding research and action. 

The spending plan allocates $20 million to researchers within the University of North Carolina system to develop water filtration technologies that can filter out chemicals such as per- and poly-fluoroalkyl substances (PFAS) that have befouled many of the state’s waterways. The money also will go to creating a registry of fire fighting foams that contain PFAS to track and manage their use. 

The document also gives $5 million to the North Carolina Policy Collaboratory to study the best ways to reduce the amount of harmful algae in lakes and rivers throughout the state. 

Innovation in water treatment is also targeted in the budget plan, with $5 million in funds flowing towards studying treated wastewater and creating pilot programs to construct wastewater handling systems for small communities. 

That’s but a trickle compared to the flood of federal funds redirected by the budget plan, which allocates more than $860 million towards wastewater, sewer and water infrastructure projects throughout the state. 

Maternal health

The budget did not expand Medicaid, but it did continue Medicaid coverage for pregnant people with incomes equal to or less than 196 percent of the poverty line for twelve months postpartum. Usually, Medicaid coverage for pregnant people ends after just 60 days, but many pregnancy-related deaths occur 43 to 365 days postpartum, according to the Centers for Disease Control and Prevention.

This Medicaid extension for pregnant people was already in effect due to a provision in the 2020 Families First Coronavirus Response Act which did not allow state Medicaid programs to cut people off during the public health emergency, North Carolina Health News previously reported.  

But when the public health emergency ends, so would coverage have ended for people who had passed the 60-day mark.

Advocates for Medicaid expansion recognized the benefits of expanding postpartum Medicaid for pregnant people but said the budget still leaves thousands without affordable health insurance. 

“This budget fails to extend health care to hundreds of thousands people by expanding Medicaid. While a study is some progress, real action remains painfully overdue, and I’ll keep fighting for it,” Cooper said.

Despite the extensions of postpartum Medicaid, Erica Palmer Smith, executive director of Care4Carolina, said the budget still fails “​​to take any meaningful steps to reduce North Carolina’s high infant mortality and maternal mortality rates by not providing more women access to preconception medical care,” in a statement.

The budget also allocated close to $10 million over a two year period to “crisis pregnancy centers,” facilities that offer pregnancy tests and ultrasounds but also seek to dissuade pregnant people from getting abortions in North Carolina.

Rural investments

The 40 percent of North Carolinians who live in rural places will see funds flow into different areas of their communities, with money allocated to projects as varied as telehealth expansion to downtown revitalization.

To address gaps within rural health care systems, the state will take about $4.9 million it received in federal ARPA funds to help small rural hospitals with COVID-19 testing and mitigation. The budget also allocates $5.8 million for loan repayment programs to incentivize doctors, nurses, physician assistants, midwives and other health care providers to practice in rural areas. 

About $1.8 million will help expand telemedicine, while another $10 million from ARPA money will award grants to hospitals statewide as they expand their telepsychiatry programs.

The budget includes projects to invest in rural economies, including using money from the opioid settlement to support workforce development and transportation projects in rural communities.

As workforce opportunities expand, so hopefully will access to the internet. The Growing Rural Economies with Access to Technology — GREAT — program sets aside $15 million to expand broadband in rural and underserved areas, with no single county allowed to receive more than $8 million. During the COVID crisis, gaps in rural broadband meant patients and providers had to abandon the use of telehealth for patient encounters. 

Millions more dollars, most from ARPA, is allocated for other rural economic development projects. The state will spend $50 million in federal money for “rural downtown transformation” projects. Half the money is allottedted for existing revitalization, such as improving parks and public bathrooms, while the other half can be spent on acquiring land and buildings, or tearing down dilapidated structures. 

More in rural economic investment:

  • About $5 million in block grants is intended to go toward projects in rural areas that will support investment and community development.
  • $1.5 millon is allocated to a rural tourism recovery project. The vast majority of those funds — $1.3 million — are dedicated to marketing to bring tourists to rural counties. The project will employ two full-time temporary workers.

Clarification: This story initially stated the budget creates a new minimum wage of $15 an hour for direct care workers. The budget creates a new minimum wage of $15 an hour for direct care workers at state-run group homes.

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Anne Blythe, a reporter in North Carolina for more than three decades, writes about oral health care, children's health and other topics for North Carolina Health News.

Rose Hoban is the founder and editor of NC Health News, as well as being the state government reporter. Hoban has been a registered nurse since 1992, but transitioned to journalism after earning degrees...

Clarissa Donnelly-DeRoven covers rural health and Medicaid. She previously worked at the Asheville Citizen Times where she reported on the police, courts, and other aspects of the criminal justice system....

Elizabeth Thompson is our Report for America corps member who covers gender health and prison health topics. Thompson is a UNC Chapel Hill graduate who has covered Texas politics for The Dallas Morning...

Thomas Goldsmith worked in daily newspapers for 33 years before joining North Carolina Health News. Goldsmith is a native Tar Heel who attended the UNC-Chapel Hill, and worked at newspapers in Tennessee...