North Carolina and the ACA’s Medicaid expansion

Proposed 1115 waiver allows for Medicaid expansion, with a work requirement, if legislature approves "Carolina Cares" expansion. But GOP lawmakers continue to block expansion.

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Medicaid expansion in North Carolina

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North Carolina has not yet expanded Medicaid under the Affordable Care Act (ACA), but Governor Roy Cooper, who took office in January 2017, began working to expand coverage as one of his first tasks as governor. State lawmakers have thus far blocked his efforts, but Cooper’s first budget proposal called for the expansion of Medicaid and he continues to push for it, despite legislative roadblocks.

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 208,000 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 September 2017, North Carolina submitted an amendment to the state’s pending 1115 waiver (which requests federal approval to transition to Medicaid managed care, described below), seeking various additional changes. One of the proposed changes is the expansion of Medicaid via Carolina Cares, but only if and when lawmakers pass the bipartisan Carolina Cares legislation that was introduced in 2017. The proposed waiver amendment notes that if Carolina Cares is approved by the legislature, the state would expand Medicaid, but with a work requirement that would apply to non-medically frail adults who aren’t taking care of a minor child, disabled child, or disabled parent, or enrolled in a substance abuse treatment program.

But the Carolina Cares legislation did not advance out of committee in 2017, and it had made no progress in the 2018 session as of April 2018. If it were to be approved by lawmakers, coverage would be expanded to adults with household income up to 138 percent of the poverty level, who would be required to work or take part in job training activities. The federal government would pay the vast majority of the cost; the state’s portion of the cost would be generated via assessments on hospitals and premiums (set at 2 percent of income) for most enrollees with income above 50 percent of the poverty level.

Governor’s effort to expand Medicaid, and Republican lawmakers’ efforts to block expansion

On January 4, 2017, 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 was to file 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). Once filed, Cooper’s amendment would have to have been approved by CMS, and the state would have had to secure the funding to cover their portion of the cost of expansion.

Cooper was asking North Carolina hospitals to contribute the funds that necessary to cover the state’s portion of the cost of expansion (states began paying 5 percent of the cost of Medicaid expansion in 2017, and that is gradually increasing until it reaches 10 percent in 2020, where it will remain going forward).

Ultimately, Cooper never filed his proposed amendment with CMS. But 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 was illegal under S.B.4.

Cooper had said that he didn’t believe S.B.4 applied 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 was a long shot, but the stakes were high and Cooper was doing as much as he could 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 noted that the lawsuit filed by Moore and Berger was 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, 2017, 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.

Since Cooper never filed his proposed 1115 waiver amendment to expand Medicaid, Moore and Berger dropped their lawsuit in July 2017.

Medicaid Expansion and the 2016 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.


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.

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.

The federal government paid the full cost of expansion through 2016. Starting in 2017, states began to pay 5 percent of the cost, and that will increase to 10 percent by 2020. The states’ portion will never exceed 10 percent, though. In North Carolina, the state’s cost to expand Medicaid is estimated at between $210 million and $600 million per year.

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.

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.”

Proposal to switch to Medicaid managed care by 2019 — and potential Medicaid expansion with a work requirement, if lawmakers approve

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 was expected to be lengthy. The state amended the proposal in September 2017, seeking to add a variety to changes, including a potential expansion of Medicaid, with a work requirement, if lawmakers were to approve the “Carolina Cares” Medicaid expansion proposal that was introduced in the 2017 legislative session. It was unclear in early 2018 whether the legislation would be reconsidered in 2018, but that had not happened as of late April.

The Medicaid managed care system would be implemented 18 months after federal approval is obtained. 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. Then-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.

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 made it clear that he would want some sort of work requirement tied to Medicaid eligibility for able-bodied adults, but no states had successfully petitioned the Obama Administration to allow a work requirement and still receive federal funding for Medicaid expansion (this has changed under the Trump Administration, which has clarified that it is much more open to the idea of Medicaid work requirements).

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 in January 2015, used to be strongly opposed to Medicaid expansion. But in October 2014, just two weeks before the 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).

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.

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?

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 state’s Medicaid and CHIP programs grew by 455,472 people from the fall of 2013 through January 2018 — an increase of 29 percent. Despite the fact that North Carolina Medicaid eligibility has not changed, that’s the same as the overall US average percentage increase in Medicaid/CHIP enrollment, including the 31 states and DC where Medicaid has been expanded.

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 January 2018, the state’s total Medicaid/CHIP enrollment stood at more than 2 million people.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

How to apply in NC

Online at or at ePass.  You can enroll by phone at 1-800-318-2596.  You can also apply in person at your local County Department of Social Services office or complete a paper application.

Eligibility: The aged, blind, and disabled.  Also, parents with dependent children are eligible for Medicaid with a household income up to 45 percent of poverty level, and children are eligible for Medicaid or CHIP with incomes up to 211% of poverty; maternity-related coverage is available for pregnant women with incomes up to 196% of poverty.

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