North Carolina’s Medicaid program may not be viable by fall 2026, according to State Treasurer Dale Folwell. Why the state legislature is withholding funds needed to keep the program afloat remains a mystery.
COVID-19-related costs and rising prescription drug and medical costs have hit the state health plan’s budget hard. The plan is expected to lose $106.3 million next fiscal year, according to a July report. The price increases far outweigh a budget already shaken by the pandemic.
The plan would provide health insurance to 750,000 state employees, teachers, retirees and dependents — more than 15% of North Carolinians with employer-sponsored insurance. People covered by the plan — public school teachers, police officers and park rangers — would pay higher premiums and have limited access to prescription drugs. The plan dropped coverage for blockbuster weight-loss drugs like Ozempic in March.
“We are reviewing our prescription drug offerings,” Folwell told Carolina Public Press.
“We’re doing everything we can to encourage people to take generic drugs. We’ve written to the federal government asking them to expedite the process so that prices for GLP-1 drugs will go down. More people are enrolled in the Medicare Advantage program than ever before in the state’s history. We’ve saved hundreds of millions of dollars, and we’re doing everything in our human power to keep it going.”
The state also plans to switch insurance from Blue Cross Blue Shield to Aetna starting Jan. 1, 2025, a move Folwell estimates will save tens of millions of dollars.
The plan calls for spending $538.8 million on COVID-related costs through July 2024. Of that, only $215 million has been reimbursed through a state budget that currently operates in the black. The state has received $110 billion in pandemic relief funds from the federal government, about 60% of which remains unspent.
State Treasurer David Falwell, a Republican and former No. 2 in the state Legislature, is asking the Republican-controlled Legislature for $250 million to keep the plan solvent in the short term.
So far, lawmakers appear to be ignoring his calls.
“There’s only one person we can turn to for funding: the General Assembly,” Falwell told CPP.
“They have the keys to the car. They’re going to make the decision… whether this car will stay on the road or not… While we’re watching Penny and the clip, they can snap their fingers and end this situation.”
“What we really want is for the problem to be solved, and that problem is solved by the Legislature taking the money that the federal government has borrowed and sent here for these types of expenses and applying it to the expenses that we incur.”
Senate Majority Leader Phil Berger did not respond to a request for comment about the Legislature’s motives for withholding funding from the state health program, and Berger has not responded to calls or emails from Falwell, according to the state treasurer.
“Why aren’t state legislatures adequately funding their state health insurance programs?” asked Joseph Harris, a fiscal policy analyst at the John Locke Foundation, a conservative think tank based in North Carolina.
“The state government tries to put money into the state retirement system every fiscal year, but they don’t do that for the state health insurance system. It remains to be seen where the politics are.”
A look at how federal pandemic relief funds have been spent so far offers some clues: The Legislature’s top focus appears to be helping businesses recover in the state, spending more than $17 million to help businesses and less than $3 million to help health care providers.
“I feel so sorry for the people who are running businesses and seeing their businesses come to a grinding halt,” Ardis Watkins, executive director of the Independent Association of State Employees, told CPP.
“But what we did with the CARES Act doesn’t seem to have made much sense. There’s nothing that directly correlates to what the state has incurred as a COVID-19 expense, more than the costs of our own employees, COVID-19 testing, vaccinations and treatment.”
Another partial explanation is that state lawmakers may be weary of rising costs, just like the state Health Insurance Commission, which has spent increasingly more money on benefits for state employees in recent years.
According to the State Legislature’s Financial Research Division, between 2009 and 2024, the number of civil servants will increase by 0.7 percent, while the price of civil servant benefits will increase by 102.9 percent.
“You can’t run a business where your costs are rising twice as fast as the money coming in,” Falwell said.
According to a North Carolina Treasurer’s report, as of June 2023, blood tests in North Carolina face an average commercial markup of 759% from Medicare, CT scans are 976% and automated urine tests are 1,120%.
“If there’s a pandemic, we can’t pay our bills,” Falwell said at an Aug. 6 press conference.
Part of the problem here is the lack of transparency in the costs of health care services.
“Under North Carolina law, contracts between a third-party administrator (in this case Blue Cross (or Aetna)) and a health care provider (hospital or physician) are considered exempt from the public records law,” Watkins said.
“Contracts involving hundreds of millions of dollars of public money are protected from disclosure because they are trade secrets. North Carolina law interprets ‘trade secrets’ very broadly. This is just a way to get people to overpay and not be held accountable.”
Harris, of the John Locke Foundation, points to reference pricing as a potential solution.
“There’s no way around it, the Legislature has to provide the funding,” Harris said, “but at the same time, the state needs to do a lot more to try and find ways to reduce these costs.”
“The way hospitals in North Carolina operate right now is they completely set the price for a procedure or service, and patients just go in and are given a bill. There’s no room for negotiation.”
“Reference pricing would let patients know reasonable and customary procedure prices: ‘This is roughly what an MRI on my leg will cost,'” Harris says. “It would create more of a negotiation process between providers, insurers and the actual patient.”
For now, it’s unclear whether the Legislature will ultimately provide the necessary funding for the state health plan, and the reasons for the silence are even murkier.
Related
Republish this story
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License. You are free to republish our articles online or in print. Simply copy and paste the article content from the box below. Some images and interactive features may not be included here.
