North Carolina governor rescinds Medicaid rate cuts amid legal challenges and opposition from Republicans

RALEIGH, N.C. (AP) — North Carolina Democratic Gov. Josh Stein is rescinding the Medicaid reimbursement rate cuts he began two months ago, a decision that protects short-term access to care for vulnerable patients while the political battle with Republican lawmakers to enact additional funding is resolved.

Stein and state Health and Human Services Secretary Dr. Dev Sanghvai announced Wednesday that the state agency will restore reimbursement rates to doctors, hospitals and other medical providers for Medicaid services that were generally reduced by 3% to 10% starting Oct. 1.

The governor has said the cuts are necessary to deal with underfunding of Medicaid, which serves more than 3 million people in the ninth-largest state. But the legal challenges to the cuts, which recently resulted in court rulings demanding that some rates return to pre-October levels, make maintaining the cuts untenable.

“What hasn’t changed is that the program doesn’t have enough money. What has changed is that the courts have made it very clear that rates have to come back,” Stein told The Associated Press in an interview.

The first-year governor said the cuts, while painful for Medicaid patients and providers, are unavoidable because a temporary spending measure approved by the Legislature in the summer falls $319 million short of what is needed to address changing populations and rising health care costs.

“The Legislature forced these cuts to the program,” Stein said. “There was absolutely nothing that I or management wanted to happen.”

Republican lawmakers said Stein’s actions were unnecessary and unprecedented at the start of the fiscal year and were politically motivated. However, GOP leaders in the House and Senate tried but were unable to craft legislation this fall to provide additional funds that would support the program longer.

Stein has tried in recent weeks to pressure lawmakers to act — even by formally calling a special legislative session last month. But House Speaker Destin Hall and Senate Leader Phil Berger declined to meet, saying Stein failed to meet the necessary qualifications for such a special session.

The governor has been pushed back as Medicaid consumers such as autistic children and providers such as adult foster homes have so far successfully sued the Department of Health and blocked certain rate reductions.

The plaintiffs accused the state of violating laws by unilaterally lowering rates and discriminating against people with disabilities. A group of groups representing thousands of doctors and other providers filed their own challenges last week to block pricing more broadly.

As part of the repeal, providers will receive retroactive compensation for the difference between the reduced and full rates for claims filed after the cuts took effect, Sangvai said.

However, the Medicaid deficit persists, with a branch of GOP leaders unable to pass a traditional two-year budget — largely because of disagreements over additional income tax cuts and teacher pay. North Carolina remains the only state without a legislative budget, according to the National Conference of State Legislatures. The budget was supposed to be drawn up on July 1.

House and Senate Republicans separately agreed in September to provide an additional $190 million for Medicaid. But the senators also wanted legislation to set aside federal money previously received to help build a free-standing children’s hospital in Wake County by two university medical schools and for rural health investments. Despite previous spending on these projects, House Republicans now have second thoughts about completing these investments.

The Legislature had already planned to meet next week, but any action or recorded vote is unlikely. Stein said restoring rates increases the urgency for lawmakers to act and identify more funds.

“If the Legislature would simply do its job and pass a budget that fully funds Medicaid, we would never have to start this entire project,” Stein said.

Sanghvai acknowledged that the program won’t run out of money until the spring. But he said restoring rates means his agency has no choice but to reduce or eliminate programs and services to achieve significant savings.

“It’s a situation we don’t want to consider because the consequences could actually be catastrophic,” Sanghvai said.