By Jaymie Baxley
North Carolina has less than a year to implement a federal rule requiring “able-bodied” Medicaid participants to prove they are working, volunteering or attending school for at least 80 hours a month.
A provision of the federal budget — the One Big Beautiful Bill Act signed into law last summer by President Donald Trump — the requirement is intended to reduce federal Medicaid spending by limiting eligibility for the entitlement program. While seniors, pregnant women and people with disabilities are exempt from the new requirement, hundreds of thousands of other beneficiaries — mainly those who gained coverage through North Carolina’s 2023 expansion of Medicaid — will be subject to semiannual eligibility checks.
Officials from the N.C. Department of Health and Human Services on Tuesday briefed members of the General Assembly’s Joint Legislative Oversight Committee on Medicaid on the myriad challenges associated with regularly verifying those non-exempt beneficiaries.
Sarah Gregosky, chief operating officer for the state’s Medicaid program, said North Carolina’s social services eligibility system, NC FAST, is already heavily reliant on automation and data-matching to minimize paperwork for beneficiaries and county caseworkers. The state uses NC FAST and many other automated data sources to verify income, residency, citizenship and other eligibility factors.
But increasing the frequency of redeterminations for the expansion population from annual checks to verification every six months — while layering on a new work requirement — will significantly increase the administrative burden on counties, Gregosky said.
She warned that the timeline for implementation is exceptionally tight. Initial notices to beneficiaries must begin going out this summer, months before the work requirement is set to take effect on Jan. 1, 2027.
“We have a very, very short runway,” Gregosky told the lawmakers who serve on the committee.
At the same time, the state must complete extensive technology upgrades, integrate new data sources related to employment, train county staff and educate beneficiaries — all while awaiting federal guidelines that are not expected until June.
“This is a complex technology, policy and process change,” Gregosky said.
Little leeway, high costs
Even with all the challenges, Gregosky told legislators that the federal Centers for Medicare and Medicaid Services has signaled it does not plan to grant deadline extensions — even if states are “making good-faith progress toward implementation.”
Melanie Bush, assistant secretary for NC Medicaid, said that while the state has much of the basic technical infrastructure needed to comply with the new federal law, it lacks a way to cover the added administrative costs.
Because the work requirement and twice-yearly redeterminations apply only to the Medicaid expansion population, Bush said, state law restricts the department from using state General Fund dollars. That means the money must come from the same funding streams used to finance expansion.
When the General Assembly passed expansion, which extended coverage to more than 700,000 people by raising the state’s long-standing income ceiling for Medicaid, it did so with the understanding that 90 percent of the measure’s cost would be paid by the federal government.
The remaining 10 percent has been covered through a tax on hospitals — which the One Big Beautiful Bill Act mandates that states reduce, cutting that source of revenue by almost half by 2032.
NC DHHS anticipates needing millions more each quarter to pay for additional county staff, system upgrades, vendor contracts and member outreach, according to Bush.
She outlined three potential financing options that are under discussion with lawmakers and hospital groups: redirecting more hospital-related funding into money transfers between state agencies, increasing the share of tax revenue on insurance premiums that is dedicated to Medicaid expansion, or tapping into savings in other state departments that have been generated by expansion.
For example, Medicaid expansion dollars now can pay for some health care in prison, reducing the amount of state funding having to be allocated for that purpose. But those savings can be challenging to quantify.
Bush said the state’s General Assembly must take action “as soon as possible” to keep implementation on track.
“We are on a very tight timeline,” she said, adding that changes to state law would be required to authorize the additional spending and the financing approach.
Burden on counties
Kevin Leonard, executive director of the N.C. Association of County Commissioners, told the committee that local officials in the 100 counties represented by his organization may not yet “fully grasp the significant financial impacts” of the One Big Beautiful Bill Act, designated as H.R. 1 in Congress.
“H.R. 1, from the view of the North Carolina counties, is one of the most significant unfunded mandates and one of the largest shifts of administrative and economic responsibility that our state and our counties have seen in generations,” he said.
Leonard said county governments — especially those in rural parts of the state — have few options for absorbing the added costs associated with administering the new requirements in the law. Their choices, he said, are largely limited to raising taxes, delaying badly needed capital projects or cutting services that residents depend on.
“Raising taxes is often not palatable, so cutting programs or delaying capital and maintenance needs is most common,” Leonard said. “These will be the issues heavily on the minds of county managers and elected county commissioners over the next several months as they begin their work on their budgets, which must be passed by July 1.”
State statute, he noted, requires that county budgets be balanced, which further constrains county officials.
Leonard said the One Big Beautiful Bill Act effectively shifts much of the administrative responsibility for implementing the work requirement from the federal government to state and local agencies.
“In shifting its responsibilities, Congress has unintentionally, or perhaps intentionally, saddled both the state and county governments with immense physical pressure to fund the administrative costs of these programs,” Leonard said. “Congress may achieve its goal of reducing federal costs, but in my opinion, we’re going to see dramatic increases in pressure on state and local systems that serve its residents.”
Those pressures would be felt most acutely by local departments of social services, which would shoulder much of the day-to-day work required to track compliance with the work and eligibility requirements. Many of those agencies are already grappling with staffing shortages and backlogs of cases.
“It would add work to a group of people who are already working eight hours a day and are kept busy eight hours a day,” Antonia Pedroza, then-interim director of social services for Wake County, said in an interview last spring with NC Health News.
She added: “Reaching out to clients and asking them if they would like our assistance in obtaining work. Making sure that they understand what the work requirements are, when they’ll go into effect and how they might be impacted — all of those things become part of our job.”
Getting to work
State officials pointed to the role North Carolina’s workforce system could play in helping Medicaid beneficiaries comply with the new requirement.
Jennifer Jones, chief operating officer for the N.C. Department of Commerce’s Division of Workforce Solutions, said her agency is already positioned to support DHHS through its statewide network of more than 70 NCWorks Career Centers, which provide job search assistance, resume and interview support, training referrals and connections to local employers.
Jones said the division’s services are designed to promote employment stability and economic mobility — goals that align with the intent of the work requirement — but she cautioned that scaling up to meet the needs of Medicaid beneficiaries would take more people.
Workforce centers are already operating at full strength, she said, after experiencing roughly a 25 percent reduction in resources over the past five years.
Jones highlighted an existing program used for unemployment insurance claimants that she said could serve as a model for Medicaid beneficiaries. That program, which provides structured reemployment planning, follow-up appointments and accountability measures, has achieved an 80 percent compliance rate and helped participants return to work more quickly.
Extending similar support to Medicaid enrollees, however, would require dedicated staff and sustained funding, she said.
Seeking an extension
After Tuesday’s meeting, Rep. Donny Lambeth (R-Winston-Salem), a co-chair of the committee, told reporters he does not think North Carolina, which is the only state in the nation without an approved budget, will be able to satisfy the federal government’s deadlines for implementation.
“I think it’s too fast, too much work to do,” he said. “I just don’t see how we can do it.”
Lambeth said North Carolina needs “at least another six months” to prepare, and he hopes federal regulators can be persuaded to give the state extra time.
Still, he supports the work requirement, calling it a “very good concept.”
“I do think there’s people on the Medicaid rolls that probably don’t need to be on the rolls,” Lambeth said. “There are probably errors being made.”
Critics like Ciara Zachary, an assistant professor at the University of North Carolina’s Gillings School of Global Public Health, believe the work requirement will result in an untold number of beneficiaries losing coverage — not due to unemployment, but paperwork issues.
The vast majority of Medicaid expansion beneficiaries are working adults, according to NC DHHS. Before expansion, the state’s enrollment was mostly limited to children, pregnant women, seniors and people with disabilities.
“If you are of the belief, like I am, that Medicaid’s purpose is to get you healthy so that maybe you can work, and you already understand that a lot of people who can work already are working if they have Medicaid, then work requirements are just an additional barrier,” Zachary said in an interview last year with NC Health News. “It’s not something that helps people’s health, and it’s certainly not going to get more people in the workplace in jobs that help them thrive.”
Many advocates and health policy experts have pointed to Georgia’s Pathways to Coverage program, which launched in July 2023 as a way of extending access to Medicaid without actually expanding it, as a prime example of how work requirements can backfire.
The program allows residents whose incomes exceed Georgia’s strict limit for Medicaid to enroll, but only if they are working, in college or performing at least 80 hours of community service each month. Officials expected more than 240,000 people to participate in the program, but to date, fewer than 12,800 Georgians have signed up, even as the state spent tens of millions to get tracking systems in place.
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