South Asheville News

Expansion of a state's Medicaid program comes with a hefty price tag, and North Carolina legislators are in gridlock over the best way to preserve access to affordable healthcare for the needy while preventing deep wounds in the state coffers. 

A study by the American Legislative Exchange Council (ALEC) found that, while expanding Medicaid will result in higher enrollment and more insured people, the price of Medicaid per person will follow those enrollment numbers to the moon; the average cost of Medicaid in states that have expanded the program spiked by 157%, according to the study.

State Rep. Jake Johnson (R-Henderson) told South Asheville News that the possibility of Medicaid expansion in the Old North State is "an ever-evolving situation."

"The House and Senate have come up with a legislative position and are taking that to the governor to work out the final negotiations for the budget," Johnson said, "and as always, the Medicaid expansion is pretty much the biggest point of contention we've had in not only this budget process but the last one too."

The budget proposed by Gov. Roy Cooper (D) earlier this year introduced tens of billions of dollars in spending next year alone. This year's budget proposal is not his first attempt to bring Medicaid expansion to the table in earnest; he vetoed Republicans' negotiated version of his FY2020-21 budget in 2019 after the GOP jettisoned the Medicaid expansion.

The Cooper version of the budget features a major spending increase to get North Carolina back on track from the pandemic. The state is currently sitting on unspent funds and $5 billion of federal COVID-19 relief funds. One of the main focal points of this bill is the expansion of Medicaid in the state, but critics urge Cooper and the legislature to be aware of massive expenses looming.

Johnson said that Medicaid expansion is the only reason the state has not been able to have a comprehensive budget since 2018. Given that North Carolina's Medicaid expenditures in 2020 were nearly $17 billion, the added financial obligation will be significant. For the state fiscal year 2020, there were 2.1 million Medicaid beneficiaries in North Carolina, 74.7 thousand providers, and 227 million processed claims. The breakdown of ages of beneficiaries is 16.6% for infants to age 5; 37.9% for ages 6 to 20; 36.9% for ages 21 to 64; and 8.6% for 65 and older.

Jordan Roberts, government affairs associate at the John Locke Foundation, told North Raleigh Today that the 10% of the expansion cost that the state would be on the hook for will likely overrun Cooper's budget projections, forcing budget cuts or tax increases elsewhere to make up the difference. 

For the seventh consecutive year, the state's Medicaid budget finished with cash on-hand. A substantial increase in cost may tip the scales in the other direction, washing out the Medicaid budget or sending it into a deficit. 

"Furthermore, Medicaid expansion does nothing about the supply shortages in the state. Expansion will result in intense pressure on the current providers by a significant increase in demand for services. This will exacerbate the current health system problems across the state," Roberts added.

A managed care system, Johnson alleged, would drive healthcare costs down for the state while maintaining quality of care. 

"Right now what we have is a fee for service, where the state acts as the administrator of the program. That's where I have the biggest issue with our current system," Johnson explained. 

Alternative to the fee-for-service approach, a managed care system would introduce five plans across the state that private providers would need to accept as an insurance option for patients who can't afford private insurance.

"There's a competition aspect to it to hopefully drive that cost down and make a superior product," Johnson said, "and for the people who couldn't afford it, the state would subsidize those plans in a set amount." 

The representative feels that using a private insurance company to administer the plans instead of the state would increase quality of care, including encouraging patients to utilize a primary care physician. 

"[Encouraging PCPs] is a huge pillar of any plan that I would want to support, because right now in the underserved communities and immigrant communities, they'll wait until something bad happens then go to the emergency room, and that ends up getting billed to the state Medicaid plan," Johnson said. "What I would like to see is more preventative care where we can catch those things early."

The ER visits are expensive and strained by increased Medicaid coverage. Writers Brian Blase, Sam Adolphsen and Grace-Marie Turner wrote in a 2020 report for the Galen Institute and the Foundation for Government Accountability that expanding Medicaid has been shown to increase the waiting time to get seen by a medical provider, particularly in the emergency room.

“For Medicaid to meet its core mission, its focus should remain on the truly vulnerable — low-income children, pregnant women, seniors and individuals with disabilities," the analysts wrote, noting that the Affordable Care Act created an entirely new category of people who can rely on Medicaid: "childless, able-bodied, and working-age adults."

"Starting in 2020 and continuing until Congress changes the expansion matching rate, the federal government pays 90% of the costs of medical assistance for the expansion population," the Galen Institute report continued. "By providing a higher reimbursement for this population, the federal government discriminates against the traditional Medicaid populations in favor of the able-bodied, working-age adult population."

State Rep. and House Majority Leader John Bell (R-Greene) stated earlier this year that there is no appetite in his caucus to expand Medicaid, although that doesn't mean that the legislature does not want to improve access to health care services for its residents.

According to NCPR, Bell suggested expanding telehealth services and associated health care plans, reducing barriers for rural residents to access care and plant providers in rural communities. 

"Make no mistake, Medicaid expansion is not free," Bell tweeted in 2019.

Johnson said that important changes to Medicaid administration are already underway; in the last legislative session, the state initiated the transfer to managed care services through the Medicaid Transformation plan.

"The expansion is more just a fee-for-service system that we have now. It just puts more money behind it, so you can reach more people," Johnson explained. "I think we can accomplish the same goal reaching the same amount of people if we subsidize [Medicaid expansion] a little higher using some of those federal dollars."

Democrats supporting the expansion believe that this is a great opportunity to bring health coverage to those who do not have it; the federal money given to the state is believed to be the ticket to do so.

Johnson isn't opposed to the state accepting federal dollars — that was done with the CARES Act, for example — but if more money is granted from Washington, he wants to see it administered through private insurance plans that encourage primary care physicians; the current system, he said, is full of inefficiencies and slow to administer. 

The representative is also concerned that future congresses may reduce the amount that the federal government matches the state; lowering it by even 10% could put North Carolina on the hook for hundreds of millions of dollars, he said. People could be kicked off the Medicaid program if the state can no longer afford their coverage. 

What progress the legislature will make on Medicaid expansion this session is unclear. The next step in finalizing the two-year budget plan is for Republicans to present their reformed plan to Cooper. Even if Cooper does not like their modifications, the Legislature could still pass its own bill and force Cooper to make a veto decision. The governor's 2019 budget veto and urging that Medicaid expansion be up for discussion led to a stalemate that year.

Cooper has said that getting more health care coverage to North Carolina is a priority. 

“Medicaid expansion is the best way to do that. Everything is on the table this budget session," he said, according to Pulse. "I’ve agreed with the legislative budget leaders that we want to put everything on the table. We hope that each side gets what it wants – that we work together to reach a budget I can sign.”

Cooper claims that the plan would be free to the taxpayers of North Carolina. However, the John Locke Foundation stated in a 2020 analysis of the governor's proposed spending bill that would leave North Carolina "with a funding gap estimated between $119.3 million and $171.3 million in the first year alone."

States that expanded Medicaid under the ACA have signed up more than twice as many able-bodied adults as anticipated," the Locke report states. "Medicaid expansion per-person costs exceeded original estimates by 76%. Higher Medicaid enrollment, combined with higher per-person costs, has led to average cost overruns of 157%."