North Carolina Gov. Stein cancels Medicaid rate cuts amid legal and legislative battles

RALEIGH, N.C. — North Carolina Democratic Gov. Josh Stein is canceling Medicaid reimbursement rate reductions he initiated over two months ago, preserving in the short term access to care for vulnerable patients while a political fight with Republican legislators to enact additional funding gets resolved.

Stein and state Health and Human Services Secretary Dr. Dev Sangvai said at a Wednesday news conference that the state agency would restore reimbursement rates for doctors, hospitals and other medical providers of Medicaid services, which otherwise generally had been cut by 3% to 10% starting Oct. 1.

The governor had said the reductions, while unsettling for some Medicaid patients and providers, were needed to deal with a funding shortfall for Medicaid, which serves more than 3 million people in the ninth-largest state. The shortfall is not directly related to President Donald Trump's new law that in part cuts Medicaid nationwide. North Carolina, like other states, is carefully monitoring program spending in case of possible future financial demands because of it.

Legal challenges to the North Carolina reductions resulting recently in judicial rulings demanding some rates return to pre-October levels made maintaining the reductions untenable.

“What has not changed is the program doesn’t have enough money. What has changed is that the courts have made very clear that the rates have to go back,” Stein told The Associated Press in an interview.

The first-year governor said the reductions were unavoidable because a stopgap spending measure the legislature approved in the summer fell $319 million short of what was needed to address population changes and rising health care costs.

“The legislature forced these cuts onto the program,” Stein said. “It was absolutely nothing that the department or I wanted to have happen.”

But Republican legislators repeated Wednesday that Stein's rate reductions were unnecessary and politically motivated, carried out early in the fiscal year when Medicaid funds were readily available.

Stein “manufactured a crisis out of thin air, and regular North Carolinians paid the price for it,” GOP state Rep. Larry Potts, a health budget writer, said in a news release. “I’m glad he’s finally cleaning up his mess, but it should’ve never gotten this far.”

Still, state House and Senate GOP leaders tried but could not work out this fall legislation to provide extra money that would buttress the program longer.

Stein attempted to pressure lawmakers to approve funds — even by formally calling a special legislative session last month. But House Speaker Destin Hall and Senate leader Phil Berger refused to convene it, saying Stein failed to meet qualifications for such an extraordinary meeting.

The governor was pushed to relent as Medicaid consumers such as children with autism and providers like adult care homes successfully sued the health department so far and blocked certain rate reductions. A host of groups representing doctors and other service providers filed their own broader challenge last week.

As part of the reversal, Sangvai said in an interview, the providers will receive retroactively reimbursements for the difference between the reduced and full rates for claims filed after the reductions took effect.

Leaders of organizations representing physicians and services for people with intellectual disabilities, behavioral needs and others attending the news conference praised Stein for restoring the rates.

They also described results of the temporary reductions. They said some doctors declined to see additional Medicaid patients or reduced how many they would treat. Rate cuts exacerbated challenges to recruit and retain workers and prompted some providers to cut community-based services and support. It would have been worse had the reductions continued, they said.

"Many practices have faced the difficult possibility of closing their doors or laying off staff, jeopardizing care for all North Carolinians, not just those on Medicaid,” said Dr. Benjamin Simmons, president of the North Carolina Academy of Family Physicians.

The Medicaid shortfall continues, however, an offshoot of GOP leaders being unable to pass a conventional two-year budget. North Carolina remains the only state without an enacted budget, according to the National Conference of State Legislatures.

Sangvai acknowledged the program would not run out of money at current spending levels until the spring.

“Without full funding, vulnerable North Carolinians — children, seniors, veterans, people with disabilities — could lose access to care that they rely on,” Sangvai said Wednesday.

House and Senate Republicans separately agreed in September they would provide an additional $190 million to Medicaid. But they could not resolve differences over whether to keep spending now on a standalone children’s hospital and for rural health investments.

Some GOP lawmakers said Wednesday there was still time for a solution. And Berger, the Senate leader, said separately that Stein's administration had failed so far to consider cutting unessential expenses to ensure Medicaid operates efficiently.

The legislature had already planned to convene next week, but any action or recorded votes is unlikely.