NC Medicaid fight: Cuts could affect millions, with no end in sight

Rising health care costs and increased enrollment have left the state’s Medicaid program with a gaping funding gap. But lawmakers can’t agree on a bill that would fill it, and they plan to ignore orders by Gov. Josh Stein to hold a special session this week to strike a deal.

2025-11-14

The legislature went home last month having failed to pass a comprehensive state budget by the July 1 start of the fiscal year. Lawmakers don’t plan to take any more major votes this year.

Caught in the middle are the millions of North Carolinians on Medicaid, plus hundreds of thousands who work at hospitals, doctors’ offices and clinics — businesses that are now taking financial hits because of the shortfall. 

Here’s a breakdown of the battle over the funding  — and what happens if the shortfall isn’t solved.

What is Medicaid?

Medicaid is the biggest single health insurance program in the country. It’s mostly for low-income people and families, although there are some exceptions, including for people with certain disabilities. In North Carolina, more than 3 million of the state’s 11 million residents are on Medicaid. Nearly half are children, according to the Kaiser Family Foundation, a health care policy group that published its latest analysis of the state’s Medicaid population and costs in May.

Who can get Medicaid?

The program is open to all qualifying U.S. citizens. It’s also open to legal immigrants who live in North Carolina and who, pending a few exceptions, have had legal status in the U.S. for at least five years.

 Income levels for Medicaid eligibility vary depending on how many people are in a family, in addition to other factors, including the age of the people in the family. A single mother, for instance, could enroll in Medicaid for both herself and her child if she made $29,196 or less per year. That’s the equivalent of about $14 per hour on a full-time schedule. If she made more than that, then she’d no longer personally qualify for Medicaid. Her child would still qualify, however, as long as the mother didn’t make more than $44,628 per year. If she did make more, neither she nor her child would qualify for Medicaid — unless they had disabilities, or she became pregnant again, in which case she would be covered by Medicaid during her pregnancy, as long as she didn’t make more than the monthly equivalent of a $63,024 annual salary.

Who pays for Medicaid?

Taxpayers cover the cost of Medicaid. North Carolina’s Medicaid program cost $19.4 billion last year, according to the Kaiser Family Foundation. The federal government paid $14.2 billion, leaving the other $5.2 billion to the state government.

Why is North Carolina short?

It’s the state’s share of Medicaid costs that’s now causing trouble: North Carolina lawmakers have failed to pass a new state budget, leaving Medicaid under-funded by hundreds of millions of dollars.

Republicans lead both chambers of the state legislature. They agree with Stein, a Democrat, that the legislature hasn’t approved enough funding for Medicaid. But they disagree with Stein that that funding shortfall needs to be fixed immediately.

Stein ordered lawmakers to return to Raleigh this week to convene a special session focused on funding Medicaid. But Republican legislative leaders told Stein that they plan to ignore his order. The state Constitution gives the governor the power to call special sessions, but GOP lawmakers said that power is only supposed to be used in “extraordinary occasions” — and they don’t believe the lack of Medicaid funding rises to that level.

“Gov. Stein’s trumped-up ‘crisis’ is not ‘extraordinary,’ and thus the General Assembly will not convene upon his call,” state Senate leader Phil Berger wrote in a statement.

How did we get here?

The Medicaid shortfall is tied to broader political infighting between top leaders of the state House of Representatives and the state Senate. The two chambers are far off in budget negotiations, which has been causing acrimony for months now.

One disagreement is a fight over funding for a new state children’s hospital, which is slated to be built in Apex. State lawmakers agreed in 2023 to put about $320 million toward the multibillion-dollar project. Earlier this year the Senate proposed adding an extra half-billion dollars, but the House went in the opposite direction, suggesting that lawmakers should actually demand the hospital project give back over $100 million of the already-approved money.

The Senate has since backed off its proposal to increase funding for the children’s hospital, but it also doesn’t want to demand money back. Senate Republicans have agreed to fund Medicaid, but only if the House agrees not to touch the children’s hospital money, leaving it at the level approved in 2023. House Republicans say that debate needs to be left to broader budget negotiations. They’ve agreed to fund Medicaid but won’t agree to tie it to any sort of deal on the children’s hospital.

As a result, the funding deal has stalled because each chamber refuses to vote on the other’s proposal.

What's happening because of this shortfall?

The state has begun cutting what it pays to doctors and hospitals for treating Medicaid patients. That has in turn led to some medical providers saying they will stop taking on any new patients who are on Medicaid.

“We have heard from providers who have said, ‘With these rate cuts, I'm not going to take any new Medicaid patients,’” Dev Sangvai, Department of Health and Human Services secretary, told WRAL in an interview. “Oftentimes, the phrase they will use is, ‘I’m closed to new Medicaid.’ So thankfully, continuing to serve the patients who they already consider to be their patients, but not taking any new Medicaid patients. … We've also heard some say, ‘Hey, maybe now is the time for me to stop seeing Medicaid altogether because of these rate cuts.’”

Sangvai and his staff at DHHS, which administers Medicaid in the state, have begun instituting those cuts in recent weeks: 3% for most providers, but as high as 10% for some more specialty practices.

Are the cuts actually necessary?

That question is key to this dispute. Stein and Sangvai say the cuts are necessary. GOP state lawmakers say they’re not.

Republican lawmakers have criticized the reimbursement cuts, saying they think they’re premature and that the state could’ve held out a few months longer. Starting to make cuts in 2025, they say, was a purely political move intended to anger hospitals and doctors and pressure the state legislature to act.

But Stein has said that argument, to hold off on cuts, only makes sense if the legislature actually passes a new state budget in early 2026. And he has no reason to believe they’ll be able to do that, he said.

In a letter to Stein, House Speaker Destin Hall pledged a vote to fully fund Medicaid by May 1, 2026. But Berger didn’t sign on.

What do Republicans say?

Berger and Hall, while disagreeing on much in this process, agree on one thing: They’re angry about the cuts to health care providers, viewing them as politically motivated to engineer pressure. Both of their caucuses receive large amounts of political contributions from health care executives and groups that lobby on behalf of hospitals, doctors and others in the health care industry — including many who are now mad about losing money on Medicaid patients.

Hall explained his lack of urgency to address Medicaid now, instead of next year, by saying that Stein could order DHHS to stop the cuts anytime he wants: “[Stein] can and should simply stop all Medicaid cuts since the legislature will be back this spring with more than enough time to add additional funds if needed,” Hall said in a statement.

What do Democrats say?

North Carolina’s status as the only state in the country without a new budget is a massive red flag, Stein and other Democrats say, especially since Republicans control both chambers of the legislature by wide margins. Failing to pass a new budget, and then failing to pass standalone Medicaid bills, gives Democrats little confidence in the ability of Republican legislative leaders to operate any differently next year.

“Part of the reason why we put the rate cuts in place — and the magnitude of the rate cuts — is really to consider what happens if no additional dollars are funded,” Sangvai, a Stein appointee,  told WRAL.

Stein slammed Republicans, who last month convened to redistrict the state’s congressional map further in their party’s favor, but then adjourned without reaching an agreement on Medicaid or the budget as a whole.

“This is the latest example of their dysfunction that has become the norm of this North Carolina General Assembly,” Stein wrote in a statement on Republicans’ refusal to heed his call for a special session on Medicaid. “The Republican majority has made the time to damage our democracy with their gerrymander. But when it comes time to protect people’s health care? When it comes time to enact a comprehensive budget? They’re on vacation, and they’ll see us next year.”

What's next?

It’s a waiting game at this point.

Stein could feasibly sue the legislature for flaunting his order to come back for a special session. But even if he won in court — which isn’t guaranteed; Republicans say his order was unconstitutional — it wouldn’t do much. He can’t force the legislature to vote, just to return to Raleigh. So even if a court ordered lawmakers back, they could immediately adjourn and head right back home.

So now the question is simply just if, or when, the legislature decides to approve the funding that all sides agree is needed to end the cuts.

Sangvai said the sooner lawmakers agree to fully fund Medicaid, the sooner he can go back to paying health care providers what they should be making for treating Medicaid patients.

“We have a groundswell of support from the provider community, who understand why [DHHS] had to make these very difficult decisions,” he said. “And they also understand how we can avoid making them — by getting the General Assembly back together, agreeing on a rebase, being able to appropriate that, so we can actually reverse any of the cuts we've made.”