NC Medicaid expansion faces uncertain future as GOP eyes federal cuts

Jay Ludlam, a white man wearing a suit, tie and eyeglasses, speaks into a microphone during a presentation about the fate of North Carolina’s Medicaid expansion program on Feb. 26, 2025.

By Jaymie Baxley

In December 2023, North Carolina became the 40th state to expand eligibility for Medicaid, opening up the government-funded health insurance program to low-income adults who previously made too much money to qualify.

Nearly 630,000 people have gained coverage since expansion took effect, surpassing state health officials’ initial two-year enrollment projection months ahead of schedule. The measure has been particularly popular in rural areas, where residents are less likely to have health insurance and access to care is often limited.

But the success of expansion could be undone overnight if Republicans in Washington move forward with a plan to slash federal funding for Medicaid.

The federal government pays 90 percent of the cost for expansion patients under an enhanced funding rate offered by the Biden administration, with hospitals picking up the remaining 10 percent of the bill through a special tax assessment. Along with a $1.6 billion sign-on bonus provided by the federal government, the almost nonexistent financial burden on the state is partly why Republican lawmakers in the North Carolina General Assembly finally assented to supporting the measure after more than a decade of resistance.

Their support came with a caveat: The measure includes a “trigger law” that brings expansion to a halt if the feds pick up anything less than 90 percent.

The budget passed by Republicans in the U.S. House of Representatives on Feb. 25 directs Energy and Commerce, the committee that oversees Medicaid, to cut spending by $880 billion over the next decade to offset the cost of President Donald Trump’s pledge to extend trillions of dollars in expiring tax breaks. Jay Ludlam, deputy secretary of the state’s Medicaid program, said North Carolina could see up to $27 billion in cuts over the next 10 years if the spending plan is enacted.

Addressing state legislators the morning after the budget’s passage, Ludlam explained that expansion would be “discontinued” if the federal government reduces its 90-percent match — immediately stripping coverage from beneficiaries who only recently became eligible for it.

Eliminating expansion, he added, would have an “outsized impact on rural communities.” People living in rural areas account for more than a third of the state’s expansion-related Medicaid enrollment, according to data from the N.C. Department of Health and Human Services.

“What will happen is like a balloon,” Ludlam said. “If you squeeze the balloon and you no longer allow for certain services to be paid for in one setting, the balloon will expand in the other setting, probably the emergency room, and there will be an increase in uncompensated care or individuals will fall back into the traditional Medicaid program.”

What’s at stake

Before expansion, the state’s strict income limit for Medicaid was set at an earnings level of $24,860 per year for a family of three, an amount so low it rendered Medicaid unattainable for most adults working low-wage jobs that frequently lack any health benefits.

Expansion extended coverage to residents who earn up to about $36,677 a year for a family of three, allowing many low-income workers to finally obtain coverage.

Greg Griggs, executive vice president of the North Carolina Academy of Family Physicians, believes rescinding that coverage now could have “severe and costly” consequences for beneficiaries.

“If they change the match, that would really limit access to care for a large number of North Carolinians, leading to poor health outcomes and ultimately increased health care costs in the long term,” said Griggs, whose organization represents more than 3,000 physicians across the state. “Our ability to provide preventive care and early intervention, which are really the cornerstones of family medicine, would be really, significantly compromised.”

Enrollees aren’t the only ones who would suffer. Griggs said the discontinuation of expansion is likely to have a “downstream impact” on the state’s health care workforce.

“You’re taking patients who would go to primary care [off the rolls], and more uninsured people means it’s more difficult for practices to stay open,” he said. “It disproportionately hurts our rural areas the most because that’s where the larger percentage of Medicaid patients are.”

His concerns were echoed by Peter Daniel, executive director of the North Carolina Association of Health Plans. The association represents managed care insurance companies that the state has tapped to handle the care of Medicaid recipients.

Expansion, Daniel said, threw a “lifeline” to rural hospitals that were struggling financially and at risk of going under from uncompensated costs associated with treating patients who did not have health insurance.

“If we go back to a population that’s seeing the emergency room as your primary care doc, the cost will explode again and they will basically be uninsured,” he said. “That hits your rural hospitals extremely hard.”

Twelve rural hospitals in North Carolina have either shut down or stopped providing inpatient care since 2005, according to data from the Cecil G. Sheps Center for Health Services Research at UNC Chapel Hill. At least 10 other hospitals in rural parts of the state are at risk of going under.

Daniel said expansion has made it more feasible for patients to seek preventative screenings and early care for serious conditions that would otherwise go untreated, increasing their odds of survival and reducing financial strain on hospitals.

“The initial stages of treating cancer are so much less expensive than end-stage cancer, and you can talk millions of dollars in savings on that one case of finding colorectal cancer at stage 1 versus stage 4,” he said. “Medicaid with expansion pulls in these folks that, rather than going to the emergency room as their primary doc, they have regular appointments and checkups and screenings [with a primary care physician], and we can catch these diseases at early stages rather than end-stage.”

What can be done

Rebecca Cerese, a health policy advocate with the North Carolina Justice Center, said the state is in a “unique position” because it implemented expansion through a legislative process with bipartisan support from lawmakers. Some of the other states that expanded Medicaid did so through ballot measures or executive actions by governors.

“Republican lawmakers understand the importance of this,” Cerese said, pointing to a bill introduced last month by state Rep. Donny Lambeth (R-Winston-Salem) that calls for the creation of a committee “to consider various ways in which the existing North Carolina Medicaid program could be modified to respond to any decreases in federal support in order to maintain current state funding levels.”

The bill, she said, is a “good start,” but it stops short of repealing the trigger law that the General Assembly attached to expansion.

“I would hope that they’d be willing to look at the trigger and take that language out if the enhanced match went away,” Cerese said. “The fact that we enrolled our two-year goal in less than one year shows the massive need for this program.”