By: Jordan Meadows
Staff Writer
State lawmakers on Tuesday afternoon pressed North Carolina Medicaid officials about rising costs, enrollment trends and funding gaps during a meeting of the Joint Legislative Oversight Committee on Medicaid at the North Carolina General Assembly.
The briefing from officials with the North Carolina Department of Health and Human Services came as lawmakers prepare to return to Raleigh next month to negotiate a long-delayed state budget and address a projected $319 million shortfall in the Medicaid program. The funding discussion also follows a call from Josh Stein for lawmakers to fast-track a $1.4 billion “critical needs” spending package to cover Medicaid costs and other state obligations.
Medicaid officials began the presentation by outlining the scale of the program, which covers more than three million residents across the state.
“One out of every four North Carolinians is enrolled in Medicaid,” said Melanie Bush, assistant secretary for North Carolina Medicaid. “Two out of every five children in North Carolina are covered through the program.”
Bush added that Medicaid also supports some of the state’s most vulnerable populations, including “three in ten people with disabilities in North Carolina and five in eight people living in nursing facilities.”
“There’s a lot of big numbers in this stack… so I want to talk about who is being impacted,” Bush told lawmakers.
Officials said enrollment surged during the early months of expansion but has now stabilized.
“Enrollment continues its planned normalization following the pandemic-era continuous coverage requirements,” Bush said. “Expansion enrollment has reached a stable plateau at around 700,000.”
Even as enrollment declines slightly, Medicaid spending continues to rise.
Rep. HEATHER RHYNE of Lincoln County asked officials why fewer enrollees still translated to higher costs: “Are they requiring costlier services—the ones still on Medicaid?” Rhyne asked.
Bush responded directly: “Yes.”
She explained that many individuals leaving Medicaid as pandemic coverage rules expired were healthier residents who no longer qualified, leaving a population with more complex needs.
“People who are older and disabled have more complex needs. They are the more expensive population,” Bush said. “Medical inflation in the U.S. is contributing to those costs.”
Families and children account for roughly 79 percent of Medicaid enrollment but represent only 46 percent of total spending. By contrast, older adults and people with disabilities make up about 21 percent of enrollment but drive 54 percent of Medicaid expenditures due to higher-acuity care needs.
Much of the discussion centered on the state’s annual Medicaid “rebase,” a budgeting process that adjusts funding levels based on changes in enrollment, health care usage and inflation. It primarily funds the per-person capitation rates paid to managed care plans that administer benefits.
Although total program costs are projected to decline in fiscal year 2026, state funding requirements are increasing because of changes to federal matching rates and higher utilization of care.
The Medicaid team told lawmakers that $319 million in additional state appropriations is needed to fully fund the program through the end of the current fiscal year. North Carolina has been operating without a new state budget since 2024, continuing under spending levels from the previous plan while negotiations stall over tax policy, raises for state workers and other priorities.
Earlier attempts by the state to manage the Medicaid funding gap included temporary provider rate cuts of 3 to 10 percent in October 2025. Courts later ordered those reductions reversed in December, leaving the underlying budget gap unresolved.
Sen. Jim Burgin of Harnett County asked officials what services were driving the largest increases in Medicaid spending.
“Three drivers of that rising cost is gene therapy, increase in eye services, [and] cost of prescription drugs,” Bush said.
Sen. DeAndrea Cunningham of Charlotte also questioned officials about potential task forces to evaluate Medicaid policy proposals and asked who would appoint members. Bush said similar task forces are used in other states and that the structure in North Carolina could involve either legislative or executive appointments.
Cunningham also raised questions about Medicaid eligibility rules for long-term care, specifically how long individuals must wait after transferring assets before qualifying for coverage. Bush explained that Medicaid enforces a “five-year look-back” period for financial assets.
“If they’re in your possession you may have to pay a penalty for it,” she said.
Medicaid officials outlined several strategies aimed at controlling costs while maintaining coverage. Those include refining payment rates for managed care plans, increasing accountability through performance-based financial withholds and tightening medical loss ratio standards. The program is also expanding pharmaceutical cost controls and value-based payment models for expensive treatments like gene therapies.
Officials said direct negotiations with drug manufacturers generated $2.3 billion in combined state and federal cost avoidance in fiscal year 2025.
North Carolina currently receives a 90 percent federal match for expansion coverage. If that rate were reduced, state analysts estimate the program could face a potential $27 billion loss over 10 years, putting coverage for more than 640,000 residents at risk.
For now, Medicaid officials told lawmakers that enrollment and spending trends are closely tracking projections.
