North Carolina's Medicaid expansion has improved healthcare access and economic growth, but concerns about its contribution to the federal deficit highlight the need for state-based funding strategies to ensure long-term sustainability.
North Carolina Gov. Roy Cooper signs a Medicaid expansion law on March 27, 2023, in Raleigh, N.C.
By Joshua Peters
Medicaid expansion in North Carolina officially took effect on December 1, 2023, extending health coverage to adults aged 19 through 64 with incomes up to 138% of the federal poverty level (FPL). This expansion aimed to cover an estimated 600,000 residents who previously fell into the coverage gap, earning too much for traditional Medicaid but too little to afford private insurance. The move marked a significant step in addressing healthcare disparities across the state.
This policy shift represents a pivotal change in North Carolina’s approach to healthcare, addressing long-standing gaps in coverage and access. To understand its significance, it is essential to examine the historical context of Medicaid in the state and the broader national landscape.
Medicaid was established in 1965 as part of President Lyndon B. Johnson’s Great Society programs, aimed at reducing poverty and improving access to healthcare for low-income Americans. Initially, states had the option to participate, and North Carolina adopted Medicaid in 1970. Over the decades, the program evolved, covering more individuals, including children, pregnant women, elderly individuals, and people with disabilities. However, strict eligibility requirements left many low-income working adults without coverage.
The Affordable Care Act (ACA) of 2010, signed into law by President Barack Obama, sought to address these gaps by expanding Medicaid eligibility to all adults earning up to 138% of the federal poverty level. The federal government offered to cover 100% of the costs for the first three years, gradually reducing to 90% thereafter. However, in 2012, the U.S. Supreme Court ruled in National Federation of Independent Business v. Sebelius that Medicaid expansion was optional for states. As a result, while many states embraced expansion, North Carolina, under Republican leadership at the time, declined to participate, citing concerns over long-term costs and government overreach.
For over a decade, North Carolina remained one of the 12 states that resisted Medicaid expansion. Advocates, including healthcare professionals, economists, and patient rights groups, argued that expansion would not only improve health outcomes but also stimulate economic growth. The debate intensified as studies showed that states that expanded Medicaid experienced lower rates of uninsured residents, improved hospital financial stability, and increased federal funding injections into their economies.
Governor Roy Cooper, a Democrat elected in 2016, made Medicaid expansion a key priority of his administration. However, he faced strong opposition from the Republican-controlled legislature, which blocked efforts to expand coverage. The deadlock persisted for several years, even as rural hospitals struggled financially and thousands of North Carolinians remained uninsured.
A breakthrough came in 2023 when bipartisan negotiations led to an agreement on Medicaid expansion. The shift was influenced by factors such as federal incentives under the American Rescue Plan Act (ARPA), which offered additional financial benefits for expansion states. The North Carolina General Assembly passed legislation approving expansion, and on December 1, 2023, the state officially extended Medicaid coverage to an estimated 600,000 residents.
The expansion has provided numerous benefits. Access to healthcare has increased significantly, with new enrollees filling over 3.8 million prescriptions and utilizing $58 million in dental services. The economic impact has also been profound, with an estimated $4.7 billion in annual federal funding helping to support over 37,000 jobs statewide. Additionally, Medicaid expansion has played a vital role in stabilizing rural hospitals, which often struggle with high rates of uncompensated care. Moreover, North Carolina secured an $835 million investment in mental and behavioral health services, further improving support for individuals dealing with mental health and substance use issues.
While the costs of Medicaid expansion are considerable, they are largely offset by federal funding. In 2020, the total projected cost of the expansion was $2.1 billion, rising to $4.2 billion in 2021. However, the federal government covers 90% of these costs, with the state's share funded through hospital assessments and taxes on Prepaid Health Plans. This financing strategy minimizes the fiscal burden on the state while maximizing federal support.
However, concerns have been raised regarding the impact of Medicaid expansion on the federal deficit, as increased spending contributes to rising national debt levels. To ensure long-term sustainability, North Carolina could explore ways to gradually reduce dependence on federal funds while maintaining the benefits of expanded coverage. Potential strategies include leveraging state-based funding mechanisms, encouraging private sector partnerships, and implementing cost-containment measures within the Medicaid program. By promoting efficiency and innovative healthcare solutions, North Carolina can work toward preserving the gains of Medicaid expansion without exacerbating the federal deficit.
Looking ahead, economists predict that Medicaid expansion will continue to generate positive economic and health outcomes. The increased federal funding is expected to bring approximately $1.7 billion over two years, further offsetting state expenses and driving economic growth. Projections suggest that the expansion could create as many as 83,000 jobs across various sectors, further strengthening North Carolina’s workforce.
Overall, Medicaid expansion has significantly improved healthcare access, bolstered the state’s economy, and provided crucial support to struggling healthcare facilities. With continued investment and effective policy management, the program is set to deliver long-term benefits to North Carolinians.
