Opinion: Setting the Record Straight on NC Medicaid Expansion Financing

A recent News & Observer article claiming that Medicaid expansion legislation passed by the North Carolina General Assembly could raise hospital prices paints a misleading picture by omitting key details important for context. House bill 76 “Access to Healthcare Options” is landmark legislation that will benefit our state by helping hardworking families, stabilizing rural health providers, and improving the health of our communities.

The article’s claim that North Carolina’s approach to expansion includes hidden cost, as when individuals become insured, “someone needs to pay for it,” is misleading and wrong and does not consider current utilization patterns where uninsured individuals often use the most expensive healthcare setting, the emergency department, increasing the cost of healthcare for all. Under expansion, these individuals will instead be encouraged to access less expensive primary care to get preventative services they need, avoiding ED visits.

As for who is paying for expansion, it is hospitals, at a rate of approximately $500 million a year, through a new tax.  Hospitals agreed to this arrangement despite many hospitals currently facing serious financial challenges due to inflation and workforce shortages. Additionally, hospitals agreed to carry the non-federal share of expansion knowing that certificate of need (CON) reform was a required part of the negotiations, and that CON reform will cost them an estimated $700 million a year in lost revenue.

Expansion will not just benefit hospitals, it will provide an additional 600,000 North Carolinians healthcare coverage, contribute $1.4 billion to the North Carolina general fund, and flow new payments to all payors and healthcare providers that provide Medicaid services.  Over time, this thoughtful legislation will help address subsidies and the hidden costs that those with private insurance have been paying to help provide care for the uninsured.  For years, private insurance plans have been paying the hidden cost of uncompensated care provided at hospitals and medical practices across the state.

To help hospitals have adequate funding to pay these new provider taxes and cover CON revenue losses, the state has applied to access a federal program through the Centers for Medicare and Medicaid Services called the Healthcare Access and Stabilization Program (HASP). HASP will increase Medicaid payments to hospitals that are under contract with insurance companies, providing much needed funds to stabilize the Medicaid safety net and encourage network adequacy.  In this way, the program will reinvest money that North Carolinians have already paid in federal taxes back into our communities and will especially help struggling rural hospitals.

In addition, HASP also helps hospitals to offset Medicaid reimbursement deficits. Currently, Medicaid only reimburses hospitals about 70 cents on every dollar spent caring for those covered by Medicaid.  The HASP funds will ensure hospitals can continue taking care of the health of their communities. Providers will receive Medicaid expansion and HASP payments based on actual services provided to Medicaid patients and based on negotiated contracts with prepaid health plans.

The article’s claim that North Carolina’s approach to expansion puts those who buy commercial coverage at risk of higher hospital prices is misleading. North Carolina is a highly consolidated commercial insurance market that makes hospitals price “takers,” not rate setters. Moreover, reimbursement rates paid to providers are controlled by contracts of which few have small percentage increases, significantly less than recent rates of inflation and increases in costs associated with providing care.

The legislative language for how Medicaid expansion will be financed in North Carolina was carefully researched and written and involved detailed planning which included ensuring appropriate accountability and oversight considerations. By omitting key facts and contextual details, the News & Observer’s reporting could harm the state’s efforts to do good on behalf of all North Carolinians.

Representative Donny Lambeth

Co-Chair House Health Committee

North Carolina General Assembly

Stephen J. Lawler

President and Chief Executive Officer

North Carolina Healthcare Association

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