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North Carolina’s Expansion of Medicaid Should Serve as an Inspiration to Other States
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North Carolina’s Expansion of Medicaid Should Serve as an Inspiration to Other States

North Carolina has approved Medicaid expansion—a move to bring in federal funds to bolster rural hospitals and increase resources for mental health.

North Carolina Gov. Roy Cooper (D) speaks to a crowd.

In the 13 years since the signing of the Affordable Care Act (ACA), there is mounting evidence of Medicaid expansion’s benefits for both enrollees and the sustainability of health care providers. As a result, momentum is increasing in some of the 11 remaining nonexpansion states. After years of negotiation, North Carolina passed a bipartisan bill to adopt Medicaid expansion that Gov. Roy Cooper (D) is scheduled to sign today. Assuming the state finalizes expansion in the coming months as part of the state’s biennial budget, North Carolina will be the 40th state to adopt expansion.

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While the implementation of Medicaid expansion does not have a set start date as it is contingent on the passage of the state’s 2023-2024 budget, as well as approval by the Centers for Medicare and Medicaid Services, expansion is projected to result in a 30 percent decrease in North Carolina’s uninsured rate. An estimated 600,000 North Carolinians will have access to affordable coverage, including 178,000 uninsured adults in the Medicaid coverage gap. The latter are among the approximately 2 million adults living in nonexpansion states who have incomes too low to qualify for financial help for ACA marketplace plans yet are not eligible for Medicaid coverage.

By expanding Medicaid, North Carolina will benefit from enhanced federal funding while also alleviating pressing health care challenges, including rural hospitals’ financial sustainability and access to mental health and opioid use disorder treatment.

North Carolina’s expansion agreement capitalizes on unprecedented federal support

Medicaid expansion has been a sticking point in the state budget since 2017. Even with the governor and advocates highlighting expansion’s health, coverage, and economic benefits, the perceived cost to the state was a primary obstacle. Opponents argued that the state portion of expanded enrollee costs would lead to increased and burdensome expenses and stalemate ensued.

However, the multiyear fiscal experience of expansion states and enhanced federal financing under the American Rescue Plan Act (ARPA) blunted cost concerns and reinvigorated expansion efforts. Under the ACA, 90 percent of expansion enrollee costs are covered by the federal government, with states bearing responsibility for the remaining 10 percent. The ACA’s Medicaid expansion is a good deal for states—the federal contribution for Medicaid expansion populations is an average of 60 percent greater than for traditional Medicaid populations. And in North Carolina, the federal government will contribute at least 21 percent more to expansion populations than it does for traditional. The ARPA—signed by President Joe Biden in March 2021—offers an additional financial incentive to nonexpansion states, increasing the federal government’s Medicaid contribution by 5 percentage points for two years after expansion. The Kaiser Family Foundation estimates that the ARPA’s incentive funds are more than two times larger than new state expansion costs. North Carolina Gov. Cooper and state lawmakers agreed that the state could not afford to forfeit the extra $1.8 billion in federal funds to expand Medicaid.

Expansion will help address the state’s pressing rural and mental health challenges

Medicaid expansion presents North Carolina with the resources and opportunity to address major health care challenges. Since 2014, six rural hospitals have closed in North Carolina, and in 2020, 30 percent of the state’s rural community hospitals were deemed vulnerable to closure due to consistent negative operating margins. The state’s experience is consistent with Government Accountability Office findings that, from 2013 to 2017, rural hospital closures disproportionately occurred in nonexpansion states. In recognition of the need to improve rural access to care, lawmakers included participation in the federal Healthcare Access and Stabilization Program (HASP) in expansion legislation. HASP provides enhanced Medicaid reimbursements to hospitals experiencing financial losses. The state’s health and human services secretary said HASP will offer a lifeline to rural hospitals facing financial challenges and estimated it will provide $60 million to the North Carolina General Fund. With Medicaid expansion, North Carolina’s rural hospitals are likely to see greater Medicaid revenue and improved financial performance, reducing the likelihood of rural hospital closure.

North Carolina, like many other states, is grappling with growing rates of behavioral health conditions and substance use disorder. In 2021, 27 percent of mental health patients discharged from a hospital emergency department were uninsured. Medicaid expansion can help: It is associated with higher rates of access to mental health treatment and reductions in delaying care and medications due to cost. North Carolina overdose deaths increased by 72 percent since 2019 and, in 2021, more than 77 percent of overdose deaths likely involved fentanyl. Medicaid expansion is associated with modest but significant reductions in total opioid overdose deaths and, according to a study using 2014 data, a 70 percent increase in Medicaid-covered buprenorphine prescriptions to treat opioid-use disorder. For North Carolina, Medicaid expansion is an investment into the state’s mental health system.

Why other states should immediately expand Medicaid

States that are exploring Medicaid expansion—including Wyoming and Kansas, where expansion bills have been reintroduced during the 2023 legislative session—should follow North Carolina’s path and also consider the following:

  • Expansion can help limit Medicaid coverage loss from unwinding pandemic-era eligibility. On April 1, 2023, states will resume Medicaid eligibility redeterminations for the first time in nearly three years. The Urban Institute estimates that 18 million people will lose Medicaid coverage in the following 14 months. Expanding Medicaid to close the coverage gap will provide an affordable coverage option for low-income people facing uninsurance.
  • State expansion expenditures are offset by federal funding. Analysis of state budget data from 2010 to 2018 found that federal funding for expansion states completely financed their increase in Medicaid spending. Furthermore, the study estimated that, during the first five and a half years of expansion, state spending increased by less than 1 percent.
  • Expansion offers state cost savings. By increasing access to coverage and reducing uninsured rates, expansion reduces demand for state-funded safety net programs, allowing states to repurpose resources for other priorities.

Conclusion

As state policymakers across the country give renewed consideration to Medicaid expansion, the impact of economic gains and the ability to confront emerging health challenges cannot be understated. The remaining nonexpansion states should follow North Carolina’s lead and act now on a unique opportunity to maximize federal support and close the coverage gap.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.

Authors

Natasha Murphy

Director, Health Policy

Nicole Rapfogel

Policy Analyst, Health

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