NC’s first full budget since 2023 reflects transformed health policy landscape

By Jaymie Baxley, Ashley Fredde and Rose Hoban

A lot has happened in the world of health care since September 2023, the last time the North Carolina General Assembly passed a comprehensive budget bill. 

The state was flush with leftover federal pandemic aid dollars that year. Additionally, the Biden administration sent the state a $1.6 billion bonus for agreeing to expand Medicaid. 

That made it possible for lawmakers to add more than $835 million in mental health spending to the 2023-24 budget plan. 

Medicaid expansion went live in December 2023, and now 730,000 more NC residents have have been enrolled and now have access to health care coverage. The state’s Healthy Opportunities Pilot, funded by expansion dollars, connected people to healthier food, transportation to medical appointments and housing upgrades. 

In 2024, hospitals in the state agreed to an incentive program that has reduced hospital debt for some 2.5 million people. And in 2025, Congress passed the “One Big Beautiful Bill Act,” also known as H.R.1, which aims to carve close to $900 billion out of Medicaid over the next decade and makes big cuts to other entitlement programs. 

Now the North Carolina legislature is weighing in with a new one-year budget proposal to carry the state through to next summer. There are no new signature health care programs in the long-awaited fiscal road map.

Instead, effects from the accumulation of all those health policy changes over the past three years are woven throughout the $34.4 billion spending plan.

The state Senate is set to consider the proposed legislation on Wednesday, the first day of the new state fiscal year, and the House will follow on Thursday. Because of the way the fiscal plan was hammered out behind closed doors by leaders of the Republican-led chambers, no changes are expected to the plan.

Experimental program can continue 

That plan, rolled out to the public Tuesday morning, appropriates $25 million in nonrecurring funds to resume North Carolina’s pioneering Healthy Opportunities Pilot, which has been on pause for nearly a year. 

Launched in 2022, HOP is a first-in-the-nation program that uses Medicaid dollars to provide rural residents with services tied to what are called social determinants of health — things like boxes of fresh food, removal of mold from houses and rides to doctors’ appointments. 

The logic underpinning the program is simple: Investing in people’s basic needs up front could keep them healthier and ultimately save Medicaid money.

While studies showed that HOP helped drive down participants’ health care costs, services ground to a halt after the General Assembly didn’t designate funds to keep the program going in the stopgap “mini” budget they passed in lieu of a comprehensive spending plan last summer.

The organizations that oversaw HOP services in their respective regions — Access East in the northeastern part of the state, Community Care of the Lower Cape Fear in the southeast and Impact Health in the western mountains — have been working for months to persuade lawmakers to restore the program’s funding.

Most of the appeals centered on the downstream savings generated by the program. A report published in March by the Cecil G. Sheps Center for Health Services Research found that HOP was associated with $164 less in health care spending per participant per month, on average, over the program’s first 32 months.

HOP steered patients away from expensive hospital care and toward outpatient treatment. Participants also had lower rates of food insecurity, housing instability and transportation barriers over time, according to the report.

A separate analysis commissioned by Impact Health showed the program also boosted local economies, generating an estimated $384 million in total business activity and supporting close to 3,000 rural jobs across the three regions. 

“We are excited to get back to work,” Laurie Stradley, CEO of Impact Health, said in a statement to NC Health News. “We look forward to working with NC DHHS and the legislature to revitalize this critical program that improves health, reduces cost and strengthens local economies.”

While the money will allow services to resume, lawmakers and program leaders say the appropriation falls well short of what is needed to fully rebuild the initiative. Sen. Julie Mayfield (D-Asheville), noted that the original request was for $80 million — $55 million more than what has been targeted.

There are also concerns about how quickly the regional organizations will be able to relaunch services after the year-long freeze, Mayfield said. Drivers for the food program have taken other jobs, for example, and some local farms that participated in the pilot have scaled back their operations. 

“It’s unclear whether all three regions can get started again, since the whole infrastructure has been degraded since the program stopped last July,” Mayfield said.

H.R. 1 affects Medicaid spending

This year’s Medicaid rebase, the annual budget adjustment needed to keep up with enrollment growth and rising health care costs, comes in at $1.048 billion. 

Similar to last year, the rebase includes one-time funding for costs that, in the past, have been funded with recurring dollars. This year, that non-recurring funding included in the rebase comprises about $200 million of the total.

Program leaders say that financing Medicaid this way makes it look like program expenses are growing faster than they actually are.

Medicaid financing will become a bigger issue in coming years as the effects of H.R. 1 start to take effect. Efforts to reduce Medicaid costs to the state can be seen through appropriations geared toward Medicaid fraud, waste and improper payments — including $1.5 million recurring funding in fraud detection technology, analytics, payment recovery software as well as a one time appropriation of $2.5 million for a state auditor investigation. 

More hurdles for SNAP

While the Medicaid financing impacts will continue to mount in coming years, cuts to federal food assistance are coming right away. 

The proposed budget includes more than $5.3 million in funding to help North Carolina implement changes to the Supplemental Nutrition Assistance Program, SNAP, required by H.R. 1, the 2025 federal budget bill passed by Congress and signed into law by President Donald Trump..

Several appropriations direct the state Department of Health and Human Services to update NC FAST, North Carolina’s benefits eligibility system, to integrate new SNAP eligibility rules created by the law, deploy artificial intelligence assisted error screening tools and hire more than 30 employees focused on training, quality control and reducing payment errors. 

Throughout the proposed budget, lawmakers state the funding is intended to respond to program changes resulting from  H.R. 1 and reduce North Carolina’s SNAP payment error rate — a measure of how often benefit amounts are higher or lower than they should be.

The investments come as the federal law shifts more responsibility for administering SNAP benefits to states, with the federal government reducing its share of SNAP administrative costs from 50 percent to 25 percent starting in fiscal year 2027. 

The law also requires states with error rates of 6 percent to pay between 5 and 15 percent beginning in fiscal year 2028. North Carolina’s annual SNAP benefit total is about $2.8 billion and at a 15 percent cost share, could cost the state as much as $420 million, as previously reported. 

At the same time, it expands work requirements, narrows states’ ability to obtain waivers and requires counties to implement new eligibility rules, increasing the administrative burden on local social service agencies. 

Among the new requirements for SNAP recipients added by H.R. 1:

• Raising the age of able-bodied adults without dependents from 54 to 64. 
• Applying work requirements to some parents with children ages 14 and older.
• Eliminating exemptions for veterans, people experiencing homelessness and former foster youth.

The outlined changes are expected to increase the number of eligibility determinations counties must make, a workload reflected in the budget’s funding for additional policy staff, quality control analysts, regional trainers and technology upgrades designed to help county social services departments implement the new rules. 

SNAP appropriations related to H.R. 1 are as follows: 

• $70,943 recurring — Update the NC FAST benefits eligibility system to implement SNAP eligibility changes and reduce payment errors.
• $2.5 million one-time funding — Modernize NC FAST, including AI-assisted eligibility tools and error screening; up to $1.5 million may be used for a contract with the Government Data Analytics Center.
• $2,176,198 recurring — Hire 25 positions in the Division of Child and Family Well-Being to reduce SNAP payment errors, including county quality leads, quality control analysts, policy staff, trainers and data analysts.
• $611,170 recurring — Hire seven regional Continuous Quality Improvement training specialists to support county social services departments administering SNAP.
• Vendor funding (one-time only) — Produce reports on SNAP and welfare expenditures, including out-of-state benefit use and spending by retailer type.

Some mental health spending remains

In the 2023 budget, lawmakers plowed more than $835 million into North Carolina’s mental health system, committing to significant rate increases, bonuses and education for a variety of mental health workers.

The money that paid for those increases is now gone, but lawmakers put some dollars towards mental health services, particularly to combatting the opioid use epidemic that claimed 2,336 lives in 2025. That annual death toll has decreased since 2023, when more than 4,400 people died as a result of overdose. 

In this year’s proposed budget, lawmakers allocated more than $79 million that has flowed to the state after legal settlements against opioid manufacturers. As in the past, the money will be used to support various projects to prevent and treat opioid use disorder, such as recovery housing and support services, evidence-based addiction treatment and medications, like naloxone, to reverse overdoses. 

In addition, lawmakers targeted funding $2 million in competitive grants to sheriffs’ departments for pilot programs to provide medications for opioid treatment $2 million in competitive grants to sheriffs’ departments for pilot programs to provide medications for opioid treatment. 

Lawmakers failed to add any new dollars to the Medicaid Innovations waiver program that provides support for people with disabilities to stay in their communities. Gov. Josh Stein in his recommended budget outlined 200 additional Innovations waiver slots at an estimated $9.3 million. However, the proposed budget contains $21.3  million to increase the rates paid for workers providing personal care services that facilitate that community participation. 

In addition, budget writers included another $70.8 million in ongoing funding to pay for personal care services provided to medically fragile Medicaid patients living in the community. The rate goes from about $23.84 per hour to $30 per hour. 

Medicaid reimbursements are paid to the agencies that employ personal care aides, not directly to workers. Those providers will ultimately decide whether — and by how much — to increase wages.

Advocates say higher wages are key to addressing persistent staffing shortages that have made it difficult for many North Carolinians to find in-home caregivers. Providers have argued that low reimbursement rates limit their ability to compete for workers.

There’s lots more

The complete budget bill, plus spending detail plan, comes in at a whopping 1,350 pages, each packed with spending and policy mandates, such as: 

• Increases the fee paid to county medical examiners from $200 to $400 per death investigation.
• A total of $6 million for crisis pregnancy centers and an additional $3.3 million for Human Coalition, a national anti-abortion advocacy organization.
• Elimination of state funding for the Nurse Family Partnership, which helps at-risk parents safely raise infants. 
• Provides $15 million for PFAS research and remediation related to fire stations, including temporary water supplies and filtration. As well as, one-time allocation of $10 million for emergency drinking water addressing PFAS and groundwater contamination
• Closes the loophole that allows large hospitals and their affiliates to be treated as a single entity for the purpose of sales tax reimbursements.

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