Governor’s budget calls for expansion, but state lawmakers resist and the AHCA could eliminate the possibility
North Carolina has not yet expanded Medicaid under the Affordable Care Act (ACA), but Governor Roy Cooper, who took office on January 1, began working to expand coverage as one of his first tasks as governor. State lawmakers have thus far blocked his efforts, but Cooper’s new budget proposal calls for the expansion of Medicaid and he continues to push for it, despite legislative roadblocks and uncertainty about the future of the ACA.
If Medicaid is expanded in North Carolina, Cooper’s administration estimates that 624,000 residents would become newly eligible for coverage. A significant number of them (estimates range from 219,000 to nearly half a million) are currently in the coverage gap, with no realistic access to health insurance at all, unless Medicaid is expanded.
In early March 2017, U.S. House Republicans unveiled the American Health Care Act (AHCA), their reconciliation bill to repeal and change spending-related provisions of the ACA. At that point, the legislation called for a freeze on Medicaid expansion enrollment as of 2020, but it allowed states — like North Carolina — that hadn’t yet expanded Medicaid to do so between now and the end of 2019 (people who are enrolled in expanded Medicaid as of the end of 2019 will be able to keep their coverage as long as they remain continuously eligible, but people would no longer be able to enroll with the generous federal funding that the ACA provided for Medicaid expansion).
But on March 20, 2017, House Republicans added a Manager’s Amendment to the AHCA in an effort to get more votes for the bill. In the policy changes created by the amendment, states’ ability to expand Medicaid with the ACA’s federal funding (ie, 95 percent funded by the federal government through 2019, and 90 percent after that) would be terminated as of March 1, 2017.
So if the AHCA were to be enacted, states like North Carolina would no longer be able to expand Medicaid with ACA funding, as the deadline to do so would be retroactive to the beginning of March. States could still expand Medicaid with their normal federal Medicaid matching rate (in North Carolina, that’s about 67 percent), but they would not be eligible to have the federal government pay the vast majority of the cost. That’s essentially a deal breaker for hold-out states that have been considering Medicaid expansion but have thus far been put off by the very small portion of the cost that states have to pay under the ACA.
Governor’s ongoing effort to expand Medicaid
On January 4, Gov. Cooper announced his intention to file an amendment to North Carolina’s Medicaid plan by the end of the week, expanding coverage as called for in the ACA. On Friday, January 6, he notified CMS that his proposal was posted on the North Carolina Department of Health and Human Services website for a required ten-day public comment period.
Cooper’s plan is an amendment to the 1115 waiver proposal that North Carolina submitted to CMS in June 2016 to overhaul Medicaid without expanding it (details below; that proposal is still pending CMS approval). Cooper’s amendment would have to be approved by CMS, and the state will have to secure the funding to cover their portion of the cost of expansion.
He’s asking North Carolina hospitals to contribute the funds that will be necessary to cover the state’s portion of the cost of expansion. If Cooper’s plan is approved and implemented, the federal government will pay 95 percent of the cost, and North Carolina will pay 5 percent in 2018 and 2019.
The state’s share will grow to 10 percent by 2020, assuming Medicaid expansion remains in place as-is under the Trump Administration. That assumption is a big one, however, as the Trump Administration and Republican-controlled congress appear likely to cut funding for Medicaid below the levels that have been provided under the ACA.
Cooper and other Medicaid expansion advocates have long noted that the state is missing out on billions of federal dollars by rejecting Medicaid expansion. Tax dollars from North Carolina are being used to pay for Medicaid expansion in other states, while North Carolina hospitals provide about $1 billion in uncompensated care each year (a figure that would decline sharply if Medicaid were expanded and those patients had Medicaid coverage instead of being uninsured).
Cooper has also noted that expanding Medicaid would create 40,000 jobs in North Carolina, and would help keep rural hospitals open.
However, expanding Medicaid would not be free. The state’s portion of the cost of expanding Medicaid is estimated at between $210 million and $600 million per year.
Republican legislative leadership asks CMS to reject Cooper’s proposal; files lawsuit to block Cooper’s amendment
Republican lawmakers in North Carolina reacted swiftly to condemn Cooper’s announcement, noting that the state enacted legislation (S.B.4) in 2013 that prevents the governor from expanding Medicaid unilaterally (the legislation blocks any “department, agency, or institution” of North Carolina from expanding Medicaid without the consent of the General Assembly).
In a letter to CMS, Republican leadership from North Carolina’s House and Senate asked CMS to reject Governor Cooper’s proposal on the grounds that it’s illegal under S.B.4.
Cooper has said that he doesn’t believe S.B.4 applies in this case, as it impedes “the core executive authority of the governor to accept federal funds to look out for the health of the people.” That argument is a long shot, but the stakes are high and Cooper is doing as much as he can to secure coverage for more than half a million of the state’s poorest residents.
A week after Cooper announced his intention to expand Medicaid by amending the pending 1115 waiver, North Carolina House Speaker, Tim Moore and Senate President Pro Tem, Phil Berger, filed a federal lawsuit (naming the NC and federal departments of Health and Human Services as defendants) to block Cooper’s efforts to expand Medicaid without legislative approval. Moore and Berger said that Cooper’s “unconstitutional Obamacare expansion scheme” necessitated “swift legal action.”
Medicaid expansion proponents have noted that the lawsuit filed by Moore and Berger is an overreach, and that Cooper’s efforts to expand Medicaid did not require a temporary restraining order, nor were they an issue for a federal court.
However, on January 14, the day after Moore and Berger filed their suit, a federal judge issued an order blocking CMS from approving Cooper’s proposal for the time being.
Medicaid Expansion and the gubernatorial race
As of 2014, likely voters in North Carolina favored Medicaid expansion by a 57 to 28 margin. Although former Governor Pat McCrory said in October 2014 that he was “trying to figure out what to do with Medicaid and whether to expand that or not,” his position appeared to be much more opposed to expansion by late 2015.
Governor McCrory was up for reelection in November 2016, and his Democratic opponent, Cooper, campaigned on a platform that included support for Medicaid expansion. Cooper said that he was “appalled by North Carolina’s failure to expand Medicaid to its neediest residents, especially when our tax dollars are already going to pay for it in other states.”
The governor’s race in North Carolina was one of the tightest in the country in 2016, and Cooper won by a razor-thin margin that was contested for weeks by McCrory. McCrory eventually conceded in early December.
Expansion thwarted under McCrory Administration
Former Governor McCrory said that he was open to the idea of Medicaid expansion, but only after they “fix the current system.” This was a reference to the legislature’s Medicaid reform efforts, discussed below in more detail.
In early 2015, McCrory met with President Obama to discuss a possible Medicaid expansion waiver, and McCrory reported that the President was “… open to certain waivers that I’m looking at to present to my legislature.” McCrory has made it clear that he would want some sort of work requirement tied to Medicaid eligibility for able-bodied adults, but a similar provision was ultimately removed from the waiver proposal in Pennsylvania, and so far, no states have successfully petitioned the federal government to allow a work requirement and still receive federal funding for Medicaid expansion.
Also in January 2015, Brad Wilson, President and CEO of Blue Cross Blue Shield of North Carolina, threw his weight behind the push for Medicaid expansion, noting that “expanding Medicaid is the right thing to do for North Carolinians.”
Thom Tillis, who was sworn-in as US Senator for North Carolina on January 3, used to be strongly opposed to Medicaid expansion. But in October 2014, just two weeks before the previous election, he noted that “we’re trending in a direction where we should consider potential expansion… I would encourage the state legislature and the governor to consider it.” (Tillis defeated incumbent Democrat Kay Hagan in the 2014 election; Hagan supported Medicaid expansion).
Medicaid expansion supporters growing impatient
By late July 2015, McCrory still had not revealed his proposal for Medicaid expansion, and advocates had begun to tire of waiting, pushing the Governor to reveal his plan or admit that he didn’t have one. And State Rep. Ken Goodman (D, Richmond) — a Medicaid expansion supporter — questioned whether McCrory would have the political clout to expand coverage anyway, given SB4 and the fact that the majority of the state legislature was opposed to Medicaid expansion.
In September 2015, the NC Justice Center introduced radio and digital advertising calling on Gov. McCrory to reveal his plan for Medicaid expansion, noting that he said the holdup was the unknowns surrounding King v. Burwell earlier in the year (the outcome of that case was decided in June 2015, with the Supreme Court ruling that ACA subsidies were legal in every state, and paving the way for states to utilize private health plans for their Medicaid-eligible population).
By late 2015, however, McCrory had mostly walked back his support for Medicaid expansion, explaining that any expansion proposal would have to wait at least three years, while other Medicaid reforms are made in the state (see details below). McCrory and President Obama had “irreconcilable differences” regarding expansion, and McCrory has basically tabled the idea for the time being.
The impact of refusing Medicaid expansion
North Carolina was one of the last states to adopt the Medicaid program in the first place; only two states took longer to implement original Medicaid coverage. The first states to provide Medicaid did so in January 1966, and North Carolina’s program didn’t become effective until January 1970.
The ACA called for Medicaid expansion in every state, covering all legally-present residents with incomes up to 133 percent of poverty (138 percent with the built-in five percent income disregard). But in 2012, the Supreme Court ruled that states could not be penalized if they didn’t expand Medicaid, and North Carolina has so far chosen that path.
The federal government paid the full cost of expansion through 2016. Starting in 2017, states pay 5 percent of the cost, and that will increase to 10 percent by 2020. The states’ portion will never exceed 10 percent, though.
By not expanding Medicaid, North Carolina is missing out on $39.6 billion in federal funding over the next decade (assuming Medicaid expansion remains in place as-is; it could switch instead to block grants or per-capita allotments to the states, with fewer federal restrictions on how the money is used). Instead, the state has been subsidizing the cost of expanding Medicaid in other states, since federal tax dollars come from residents of every state, but are being distributed to states that are expanding Medicaid.
Because Medicaid was expected to be available for all low-income residents nationwide, the subsidies to purchase private plans in the exchange were not designed to apply to people living below the poverty level, which is why hundreds of thousands of North Carolina residents who live in poverty are in the coverage gap — unable to afford private health insurance, and ineligible for Medicaid because it hasn’t been expanded.
North Carolina Medicaid reform
On September 22, 2015, North Carolina lawmakers passed House Bill 372, known as the Medicaid Transformation and Reorganization Act, to privatize the state’s Medicaid system; then-Governor Pat McCrory signed it into law the next day.
The bill was contentious, and votes were divided mostly along party lines, with most Republicans supporting the measure and most Democrats opposing it. Opposition to the legislation primarily revolved around the introduction of private, for-profit health insurance carriers to the NC Medicaid system. Opponents predicted that change would result in higher administrative costs and could incentivize carriers to withhold care from Medicaid patients in order to curtail costs. They also decried the bill for its focus on privatization of the existing system, without an effort to expand Medicaid under the ACA (North Carolina is one of 19 states that has not yet accepted federal funds to expand Medicaid).
Governor Roy Cooper, who was North Carolina’s Attorney General at the time, said that “turning to MCOs is a risky move.”
Medicaid managed care by 2019
H. 372 calls for the privatization of Medicaid in North Carolina, eventually switching to a model that involves the state contracting with three managed care companies. Those for-profit companies will provide Medicaid managed care plans that will compete with each other across the state. The legislation also calls for the creation of up to ten locally-operated networks of doctors and hospitals (“provider-led entities” or PLEs) that will offer plans across the six newly-created regions of the state. Medicaid benefits will be the same state-wide, regardless of whether the enrollee is in a managed care plan or a PLE plan.
Instead of Medicaid paying providers on a fee-for-service basis, the Medicaid managed care plans and provider-led entities will receive a per-patient payment from the state Medicaid payment, and will be responsible for any cost over-runs beyond what they receive up-front from the Medicaid system. This provision is designed to encourage innovation on the part of carriers and providers, in order to keep patients healthy and reduce overall healthcare costs (as opposed to the traditional fee-for-service model that pays providers each time a service is provided, regardless of overall health outcomes or costs).
Since the federal government funds about two-thirds of North Carolina’s Medicaid system, CMS must approve the details of H. 372 before it can be implemented. The state sent its 1115 waiver proposal to CMS in June 2016, and the approval process will likely take at least a year (as noted above, Governor Cooper’s Medicaid expansion proposal is an amendment that would be added to the pending 1115 waiver; CMS might be more likely to rapidly approve a waiver proposal that includes Medicaid expansion, since the Obama Administration CMS has been pushing states to expand coverage).
The Medicaid managed care system would be implemented 18 months after federal approval is obtained, so it could easily be early 2019 before the new system takes effect (if approved, Cooper’s amendment to expand Medicaid would take effect January 2018, however). Assuming that happens, North Carolina will join 39 other states that already use managed care systems for some or all of their Medicaid enrollees.
Prior attempts at reform
In May 2014, House Bill 1181 was introduced in the North Carolina legislature in an effort to reform the Medicaid system and move away from a fee-for-service reimbursement system and towards a model that would “reward advances in quality and patients’ health outcomes… and hold providers accountable for meeting budget targets and quality goals.”
The legislation was later revised to call for a shift to a provider-led capitated health plan model that would achieve numerous cost-containment and efficiency goals and would be implemented for the majority of the state’s Medicaid population by July 2020 (this is similar to what ultimately passed in September 2015). A slightly tweaked third version of the bill passed the House with unanimous support on July 2, 2014. Governor McCrory praised the House for their passage of the bill and urged the Senate to pass it as well. But the House and Senate did not agree on the specifics of the Medicaid reform bill, and the Senate’s version included more radical changes to Medicaid. The Senate passed their version in July 2014, but the House unanimously rejected the Senate’s bill.
The North Carolina legislature reconvened on January 14, 2015, and in March, legislation (H. 330) was once again introduced to expand Medicaid. But ultimately, the bill never made it out of committee. In addition to H. 372 (discussed above), a variety of other bills, including S. 574, S. 696, H. 525, S. 703, were also introduced during the 2015 session to “modernize” Medicaid by switching the existing fee-for-service program to a managed care model. These bills were abandoned in favor of H. 372.
Who is eligible now?
The state’s Medicaid eligibility guidelines have not changed since 2013. In addition to the aged, blind, and disabled, Medicaid is available to the following legally-present residents:
- Maternity-related coverage for pregnant women with household incomes up to 196 percent of poverty.
- Children with household incomes up to 211 percent of poverty are eligible for Medicaid or CHIP. In addition, North Carolina provides coverage for some 19 and 20 year olds with income up to 46 percent of poverty level.
- Parents with dependent children are eligible for Medicaid with a household income up to 45 percent of poverty level (for a family of three, income cannot exceed $667 per month).
- The Medicaid-run family planning program, Be Smart, is available to residents with incomes up to 195 percent of poverty. Be Smart provides free family planning and birth control. It was initially set up as a waiver (demonstration) from CMS, but was granted permanent status on October 1, 2014.
Childless non-disabled adults are not eligible for Medicaid regardless of how low their income is.
How do I apply?
- You can apply online at ePass, a website run by the North Carolina Department of Health and Human Services.
- You can also apply in person at the County Department of Social Services office in your home county. DHHS provides a list of documents that you’ll need to take with you if you go to a county office to apply for Medicaid.
- You can print the paper application, complete it, and then mail it to your county’s Department of Social Services office.
- You can apply online through HealthCare.gov or call them at 1-800-318-2596 to apply over the phone.
Medicaid enrollment is available year-round.
How many people are enrolled?
Despite the fact that North Carolina has not yet expanded Medicaid, total enrollment in the program grew by 414,396 people from the fall of 2013 through November 2016 – an increase of 26 percent.
These are people who were eligible under the existing guidelines but were not aware of that fact, or had not enrolled for some other reason. The publicity surrounding the ACA and the community advocacy groups that have been helping to enroll people have had a significant impact on getting Medicaid-eligible people enrolled. As of November 2016, the state’s total Medicaid enrollment stood at 2,010,348 people.