North Carolina officials say federal Medicaid reforms will increase the state’s costs by tens of millions annually due to new administrative requirements.
At a legislative oversight hearing Tuesday, leaders from the North Carolina Department of Health and Human Services (NCDHHS) told lawmakers the state will need an estimated $44.4 million each year in added operational costs, plus $6.5 million in 2024 to start implementing changes required under federal law.
The changes, part of a tax and spending measure signed by President Donald Trump and known as the One Big Beautiful Bill Act, include new eligibility and employment requirements set to take effect Jan. 1, 2027, for more than 700,000 Medicaid expansion enrollees.
State Medicaid Chief Operating Officer Sarah Gregosky said the requirements will necessitate significant upgrades to the state’s data systems and policy processes. Additional county-level staff will also be needed to recertify recipients every six months, instead of annually.
“All of those system changes need to be in place prior to October,” Gregosky said, noting that the timeline is challenging because the Centers for Medicare and Medicaid Services (CMS) has not released final federal guidance. Draft guidance is expected in June.
“Which means that we need to make assumptions now based on what’s in the legislation, but guidance may come out in June that requires us to adjust some of those assumptions,” she said.
Gregosky added that CMS has signaled it is unlikely to offer extensions, even for states making progress.
Assistant NCDHHS Secretary Melanie Bush urged lawmakers to authorize new funding by March 31. She proposed sourcing it through higher hospital assessments or reallocating funds from agencies that have realized savings through Medicaid expansion.
“We need legislative action as soon as possible,” Bush said.
Rep. Donny Lambeth, a Republican from Forsyth County and committee chair, said the timing could be difficult. “I’m not sure we’ll be back before April,” Lambeth said.
Some lawmakers questioned the department’s framing of the changes. Rep. Hugh Blackwell, a Republican from Burke County, suggested the reforms may reduce enrollment and criticized what he perceived as a dismissive view of potential savings.
“The overall idea I’m getting from the department is you all feel that what you’re going to be required to do … is just busy work that’s going to add cost,” Blackwell said.
NCDHHS Medicaid Director Jay Ludlum disagreed. “We are not trying to imply that there would not be offsetting costs and that this is purely busy work,” he said. “At least initially, there will have to be some investments to get there. We do have to build, in part, a system that doesn’t exist yet.”
According to NCDHHS, the state’s Medicaid program is already facing a $319 million shortfall for the current fiscal year and could exhaust its funds by spring. Republican lawmakers dispute the shortfall projection but have pledged to provide additional funding if necessary. However, the House and Senate have not yet agreed on a spending package.
