Understanding the Impact of Cuts to the NC Medicaid Budget
NC Medicaid provides health coverage for people with lower incomes. It pays for doctor visits, yearly check-ups, emergency care, mental health care and most health services.
The NC General Assembly has not provided enough funding to cover the cost of NC Medicaid for this year. As a result, many health care providers are taking a pay cut, and some services cannot be provided.
NC Medicaid must operate based on the budget that becomes law. No state government agency is allowed to ignore the enacted budget and decide to spend what it wants instead.
Who is covered by NC Medicaid?
Medicaid provides health coverage to 1 in 4 North Carolinians—that’s more than 3 million children, pregnant women, older adults, people with disabilities and working North Carolinians.
- 50% of all births in North Carolina are covered by NC Medicaid.
- 21% of people covered by NC Medicaid are older adults and people with disabilities.
- 67% of North Carolina nursing home residents rely on NC Medicaid to help with the cost of their long-term care.
- Rural communities rely on NC Medicaid. In many rural counties, more than half of the population has health coverage through NC Medicaid.
How does NC Medicaid benefit North Carolina?
- Makes people healthier
- Saves lives and increases access to behavioral health and substance use treatment
- Provides a major source of funding for the state’s rural hospitals, many of which are struggling financially
- Supports North Carolina’s workforce, including workers in child care, construction, hospitality, home health care and other essential industries
Who pays for Medicaid?
Medicaid is funded with state and federal dollars. The amount each pay is based on a formula set by the United States Congress. In North Carolina, federal dollars generally cover between 65% to 90% of the cost, depending on the service. North Carolina finances its share of funding through general revenues, taxes on insurers and health care providers and other mechanisms. 98% of NC Medicaid dollars go to services and providers across the state.
Why are Medicaid costs increasing?
Health care is more expensive everywhere, not just Medicaid, for reasons that affect all of us:
- Inflation: Everything in healthcare—supplies, wages, services—costs more.
- New, expensive drugs: New treatments for conditions like obesity, diabetes, cancer and genetic diseases can prevent serious complications and improve quality of life, but they raise costs in the short term.
- Increased demand for behavioral health services: More people are using mental health and autism services.
- Federal policy changes: When the federal government changes the rules it can add costs. For example, the “One Big Beautiful Bill Act” passed by Congress and signed into law by President Trump significantly increases paperwork. It requires states to confirm that each person is eligible for Medicaid twice a year instead of annually. That means it costs more to run the program.
Even with these pressures, North Carolina’s Medicaid program has been managing costs better than the national average, with costs growing slower per year than other states.
Why isn’t there enough money for NC Medicaid this year?
The NC General Assembly did not provide enough money to keep up with rising costs that are outside of the state’s control. NC Medicaid must operate based on the budget that becomes law. No state government agency is allowed to ignore a passed budget and just spend what it wants. As a result of this underfunding, many health care providers are taking a pay cut, and some medicines and services cannot be provided. This hurts our health care providers who do not deserve a pay cut, and it hurts people who are losing needed services.
NC Medicaid first alerted the General Assembly's Fiscal Research Division on May 9, 2025, that more money would be needed. Since that time, NC Medicaid has consistently provided updates to the General Assembly regarding projected funding needs. These efforts have included sharing detailed documentation and hosting informational briefings to outline the potential effects of insufficient funding.
Both the House and Senate introduced proposals aimed at fully funding Medicaid, however, no final agreement was reached. NC Medicaid also presented the option of utilizing the Medicaid Contingency Reserve for consideration.
Can this be fixed?
Yes, NC Medicaid remains strong and committed to serving people. It continues to perform better than national trends — but keeping it sustainable will take teamwork. Increasing health care costs, inflation and new federal requirements are a reality. While the federal government pays most of the cost, state lawmakers need to make up for the shortfall so providers can be paid and services that that help keep people healthy are still available.
This page was last modified on 10/21/2025