COVID funds beef up health care spending in budget

COVID funds beef up health care spending in budget



After months of closed-door negotiations between legislative leaders and members of Gov. Roy Cooper’s staff, North Carolina will have a budget for the first time since 2018. 

Expanding the state’s Medicaid, a policy that has been a Holy Grail for Democrats and a non-starter for Republicans, continued to hold up negotiations and disappoint Cooper. 

Nonetheless, Cooper says he plans to sign the the $25.9 billion budget that lawmakers presented this week despite the absence of Medicaid expansion and several policy changes that raise constitutional questions about the separation of powers that likely will be decided in the courts.

“On balance, the good outweighs the bad,” Cooper said in a briefing with reporters on Tuesday. “It moves North Carolina forward in important ways, many that are critical to our state’s progress as we are emerging from this pandemic.”

The tussle over Medicaid expansion, along with disagreements over teacher pay, impeded compromise between Republicans leading  the General Assembly and the Democratic governor for more than five months after the start of the state’s fiscal year on July 1. Those were the same two disagreements that led to a budget stalemate in 2019, leaving North Carolina without a new state budget document since 2018. 

What made the difference this year was the COVID-19 pandemic and the billions of federal aid flowing from federal coffers to the state to facilitate historic changes.

Those funds are peppered throughout the budget, from $4.9 million earmarked for rural hospital improvements to $20.2 million to provide COVID mitigation and treatment in jails and prisons to $89 million in additional dollars for a program to provide funds for home heating and cooling for low-income North Carolinians. 

“There are critical funding opportunities in this budget that we must seize now, in this extraordinary time,” Cooper said, explaining his assent. “Many of those opportunities would evaporate if I would veto the budget.” 

Many parts of the state’s health care infrastructure will see infusions of federal funds from the American Rescue Plan, along with smaller provisions that often are painstakingly advocated for and negotiated among lobbyists and lawmakers. 

Medicaid transformation proceeds

While the budget does not expand Medicaid, it does create an 18-member joint legislative committee to study health care access and Medicaid expansion.

“While a study is some progress,” Cooper said, “real action remains painfully overdue, and I’ll keep fighting for it.”

The legislative study comes despite the fact that Cooper had created a similar study group, that included lawmakers, in December 2020 to examine expanding access to care. That group eventually concluded the most cost-efficient way to get more people covered was through expansion of the public program.

The budget allocates hundreds of millions for continuing to shift Medicaid from a fee-for-service model run by the state to one that’s run and managed by private managed care companies. 

Just over $430 million is designated to the Medicaid Transformation Fund over the next fiscal year; $133 million of that is to cover the costs of contracts, temporary staffing, and the state’s pilot to tackle social determinants of health.

Other costs associated with Medicaid include:

  • $4.3 billion for Medicaid payments, which is estimated to be about the same for the coming fiscal year
  • $49.2 million in Medicaid administrative costs and $33.3 million in Medicaid rebase, the calculation of how much above previous estimates it will cost to run the Medicaid program. The transition to managed care was done largely to rein in these two costs. 

Lawmakers made it possible for low-income parents whose children end up in the foster care system to remain on the Medicaid program. Often, these parents are struggling with substance use disorders, and once their children are removed from their homes, they lose the Medicaid coverage they gain as the parent of a low-income child. 

Advocates have successfully argued to legislators that keeping these parents on the program makes it possible for them to get into treatment and, eventually, regain custody of their children. This provision is likely to affect 3,000 to 5,000 parents annually. 

Private duty nurses and direct care workers, who are often paid through Medicaid, will see their wages increase. The budget creates a new minimum wage of $15 an hour for direct care workers, those who work with people with disabilities and the elderly. Private duty nurses will see their wages rise to $11.25 every 15 minutes, or $45 an hour. 

The state will appropriate $274.8 million for Medicaid home- and community-based services, using funding from the American Rescue Plan. This will lead more slots to open up within for these in-home care services delivered to North Carolinians with disabilities. The move is the result of a decades-long legal fight within the state after a Supreme Court ruling found the state was in violation of the Americans with Disabilities Act by its overreliance on institutionalized care. 

The money is intended to help move people out of these institutions and into local and home-based care. By June 30, the Department of Health and Human Services must add at least 114 waiver slots to its Community Alternatives Program for Disabled Adults. The state is also supposed to add 1,000 new slots to its N.C. Innovations Waiver, which aids adults with intellectual and developmental disabilities, though the state gave itself until 2025 to complete that transition. 

Those on Medicaid will also see some changes. Copays for most adults will increase to $4. By Jan. 1, Medicaid plans must include coverage for orthotic devices and prosthetics when those are prescribed by a podiatrist. Finally, children on Medicaid who attend charter schools can now have those health care costs reimbursed by the program. 

Nursing homes, adult day care get boost



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