Map shows the U.S. and the status of each state with regards to Medicaid expansion. 12 states are colored in orange, showing that they have not yet adopted the policy.
The status of state action on Medicaid expansion as of March, 2022. Thirty-eight states and the District of Columbia have chosen to expand since 2013. North Carolina is among 12 states that have not. Map courtesy: Kaiser Family Foundation

By Rose Hoban

Lawmakers from a bipartisan committee formed to consider the possibility of Medicaid expansion had a lesson in numbers a week ago when they met for their second meeting.

Big numbers, too.

Millions and billions of state and federal dollars that could be saved or put to other uses by extending the benefit to some 500,000 North Carolinians who could qualify for the health care coverage if North Carolina took the same action 38 other states have.

North Carolina is one of only 12 states that has not taken advantage of Medicaid expansion, something that became possible as a result of the Affordable Care Act. 

“We’re in a great position to move forward with additional folks,” Medicaid head Dave Richard told the committee. He cited the relatively smooth transition to managed care that’s been taking place over the past eight months and North Carolina’s high rate of providers enrolled in the program. 

What made this meeting unique is that many of the arguments have been made before, but for years, the issue was so partisan as to be almost unmentionable. 

At the first meeting in late February, Rep. Donny Lambeth (R-Winston-Salem) said some Republicans had warmed to the idea, but others in the state House were still “chilly” about the possibility.

Nonetheless, Lambeth added, if he did not think minds could be changed he would not be leading the committee.

COVID changed everything 

Usually, the federal government pays for more than two-thirds of every Medicaid dollar spent in North Carolina – 67.65 percent to be exact. 

When Congress passed the first COVID relief bill in the spring of 2020, federal lawmakers anticipated higher costs from the pandemic and gave states a boost to that federal match up to 73.85 percent. That boost will expire once the federal public health emergency declaration ends, something currently slated to occur on April 16.

Adults have to be pretty poor to qualify for Medicaid. Parents of children under 18 can get covered if they earn below a certain threshold which comes to about $8,004 annually for a family of three. 

As part of the federal response to COVID-19 in March 2020 states were told to keep new beneficiaries on Medicaid, even if their income bumped above the income threshold. Richard estimated that about 200,000 new adult beneficiaries have been added to North Carolina Medicaid since March 2020, out of a total of 522,000 additional people on the program. Many of those beneficiaries are low-income workers — farmers, child care workers, certified nurses aides and others — who would have been eligible for coverage under Medicaid expansion, he said.

The number of Medicaid beneficiaries rose to about 2.7 million as a result of federal rules forbidding states from kicking people off of the program during the pandemic. About 200,000 of those people would be eligible for Medicaid expansion, said North Carolina Medicaid head Dave Richard. Graph, data courtesy: NC DHHS

Here’s the rub.

If North Carolina had expanded the Medicaid program before the pandemic, those same people would have had their care reimbursed by the federal government at a higher rate.

“If you would’ve expanded right prior to the pandemic, the state of North Carolina would have paid 10 percent of the total freight for expansion population, [the] federal government 90 percent of that,” Richard said.

Instead, North Carolina has been paying 26 percent for the care given to these 200,000 people for the past two years, costing the state millions of extra dollars. 

Savings, extra dollars dangled

Lawmakers decided in last year’s budget that they would extend Medicaid coverage to newly postpartum women for a year after they’ve given birth. Because the state did that independent of Medicaid expansion, it’s costing extra, explained Mark Collins, a staff member from the legislative Fiscal Research Division. 

“Many of the new mothers who would be eligible for that program would also be eligible for expansion,” Collins said. “So you don’t need all of the additional funding that’s been put in the budget for that, he told lawmakers.”

If they were covered instead through an expanded Medicaid system, in just six months the state would save about $15 million over what it has set aside to pay for this program right now. 

The state could save state dollars being put toward other programs, too, Collins said.

Some parents who qualified for Medicaid were bumped from the rosters if they surrendered their children to foster care while they struggled with alcohol or drug problems. They lost coverage at a time they needed health care.

“That program wouldn’t be necessary with expansion and in six months, that would save the state about $9 million there,” Collins explained. 

Finally, the federal government, in an effort to induce the 12 holdout states to finally expand, has dangled an additional 5 percent in the federal Medicaid reimbursement rate for two years.

“That would save the state, in general fund terms, 1.4 billion to 1.5 billion,” Collins said. “And with that savings that’s generated, that allows those first two years of expansion to be a net fiscal positive to the state.” 

Most of that savings would go to the general fund in the state budget, Collins said, meaning that lawmakers could use the money for pet projects or increase the rainy day fund. In previous attempts to expand Medicaid, Collins reminded the lawmakers, hospitals had agreed to an additional assessment to cover some of the state’s costs. Insurers had agreed to a tax that would also be earmarked for covering the costs of expansion, he added. 

“Net total impact and of course it’s hitting different funds, but total impact would be a reduction of $192 million,“ he said, even after the state’s annual contribution of about a half-billion dollars to cover the program’s costs. 

Jobs, rural development touted

The North Carolina Rural Center has long favored Medicaid expansion, largely because of the economic development potential that would benefit many rural communities. 

“Rural people are disproportionately uninsured compared to their urban and suburban counterparts,” Rural Center head Patrick Woodie told the committee. “Twenty of the 22 North Carolina counties with the highest percentage of uninsured people are all rural counties.” 

According to Patrick Woodie, head of the NC Rural Center, most of the counties with the highest rates of uninsurance are in rural areas. Some counties have more than 20 percent of their residents without a way to pay for their health care. Map courtesy NC Rural Center.

Enacting the policy, Woodie said, would serve “as an economic solution with a multiplier effect to support the local economy while boosting local and state revenue.”

“It creates opportunities for small businesses across the state by reducing barriers to establish businesses and building the workforce,” Woodie added. “It supports health care in rural areas by injecting funds to retain providers, save rural hospitals and recoup previously uncompensated care.”

Woodie cited a study originally published in 2014 and updated in 2019 showing substantial economic benefit in the form of taxes accruing to the state. Woodie put the number at about $168 million in state and local taxes gained by 2025, largely from the creation of some 83,000 jobs, many of them rural. 

Woodie noted that three-quarters of all North Carolina businesses have fewer than 10 employees. 

“They are really the meat and potatoes of local rural economies,” Woodie said. “They’re also among the most vulnerable. In a 2019 survey, small business owners identified the cost of health insurance as one of their top concerns. This was confirmed by our own 2020 regional entrepreneur focus groups with small business owners across rural North Carolina.”

In other states that expanded, Woodie said, rural communities benefited. 

“Kentucky, another very rural state, found Medicaid to contribute substantially to the state economy,” Woodie told the committee. “Kentucky is estimated to have experienced a cumulative $819.6 million positive state economic impact through the 2021 fiscal year since their adoption of expansion in 2014.”

That state saw a decline in the rate of uninsured from 14.3 percent in 2013 to 5.1 percent in 2015.

In 2019, Woodie pointed out, researchers projected a $7.54 billion increase in the expected gross county product over three years in North Carolina if Medicaid were expanded

“These projections range from $233 million in the northeast region, and $372 million in my home region in the northwest to $1.6 billion in the Piedmont Triad region and $2.2 billion in the north central region,” Woodie said, noting that these projections were made in 2019 and that the pandemic may have changed the calculus. 

The numbers seem to have gotten the attention of lawmakers. Last week’s committee hearing lacked the fiery rhetoric from Republicans that usually greeted any mention of expansion over the past decade. 

One of the only real concerns raised by lawmakers was whether or not providers would have enough capacity to absorb anywhere from 500,000 to 600,000 new beneficiaries.

“The health plans are well equipped to develop innovative approaches to meeting the health care and other needs of a Medicaid expansion population,” said Peter Daniel, executive director of the NC Association of Health Plans, which represents the Medicaid managed care companies. 

The health plans have absorbed about 1.6 million beneficiaries already, Daniel said, and met federal benchmarks for provider access, even in rural areas that usually struggle. 

“The capacity of the plans is more than adequate, in my opinion,” Daniel said. 
The committee meets again onTuesday, March 15 at 2 p.m. to hear from providers and officials from some other states that have already expanded to hear about their experiences.

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Rose Hoban

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...