North Carolina will cut Medicaid rates in October, putting care at risk

The General Assembly has still not agreed on a full budget and the “mini-budget” it passed last month fell $319 million short of what is needed to fund Medicaid. The state’s health secretary told lawmakers that if they don’t fill that gap, some services would have to be reduced.

The North Carolina Department of Health and Human Services will slash Medicaid spending by $319 million effective Oct. 1, Secretary Devdutta “Dev” Sangvai wrote in a letter to General Assembly leaders Monday.

That reduction — coming in response to a shortfall in the state budget and changes to Medicaid policy in the One Big Beautiful Bill Act — means the state will reduce rates by 3% to all medical providers, as well as cuts of 8% to 10% for inpatient and residential services and 10% for behavioral therapy and analysis for patients with autism.

In the letter obtained by NC Newsline, Sangvai wrote that while NCDHHS requested $819 million for the 2025-26 Medicaid rebase — the state’s calculation of required costs for the Medicaid program, accounting for growth in enrollment, increases in drug prices, and other factors — just $500 million was appropriated for those purposes, requiring widespread reductions.

“To meet an effective date of October 1, we must begin several administrative steps now, including notifying providers and beneficiaries, updating contracts and systems, and informing our federal partners at the Centers for Medicare and Medicaid Services (CMS),” Sangvai wrote. “We have attempted to make these cuts reversible in the event that additional funding is approved. Absent additional appropriations by the General Assembly, however, NCDHHS will proceed with the reductions described herein.”

As part of a stopgap budget signed by Gov. Josh Stein on Aug. 6, the General Assembly appropriated $600 million for Medicaid, $500 million of which will go to the rebase and $82 million of which will go to the Medicaid Managed Care Oversight Fund, which Sangvai wrote still has a $33 million deficit. The remaining $18 million will make up for what he called a “missing LME/MCO transfer,” referring to the Local Management Entity/Managed Care Organizations that manage some Medicaid services.

The letter also outlines plans to entirely cease optional coverage for GLP-1s, drugs like Ozempic and Wegovy commonly prescribed for weight loss. GLP-1s will continue to be covered when prescribed for other health issues such as diabetes and heart disease. NCDHHS will also pull funding for the Integrated Care for Kids Pilot, which will end ahead of schedule, a spokesperson wrote in an emailed statement.

Sangvai also indicated administrative cuts ahead, including ending or reducing contracts, letting temporary employees go, and ending some quality control and compliance functions. “These cuts will significantly impair NC Medicaid’s ability to be responsive to emerging needs and inquiries, monitor services for quality and compliance, and continue making timely operational improvements,” he wrote.

“Despite careful efforts to minimize harm, the reductions now required carry serious and far-reaching consequences. Most immediately, reduced rates and the elimination of services could drive providers out of the Medicaid program, threatening access to care for those who need it most,” Sangvai wrote. “NCDHHS remains hopeful that additional appropriations can be made to prevent these reductions.”

In a statement to NC Newsline, NCDHHS spokesperson Summer Tonizzo wrote that the appropriation shortfall “will result in cuts to services and reductions to provider rates to stay within budget.”

“All Medicaid providers will face a minimum 3% reduction in reimbursement rates, with some services — including physicians, hospice care, behavioral health long-term care, and nursing home services — seeing steeper cuts of 8% and 10%,” Tonizzo wrote. “These reductions may cause some providers to stop accepting Medicaid patients, as the lowered rates could make it financially unsustainable to continue offering care.”

Tonizzo reiterated Sangvai’s comment that “NCDHHS has attempted to make these cuts reversible in the event that additional funding is approved.”

A spokesperson for Stein’s office wrote that he continues to urge the legislature to pass a complete budget and make up for the shortfall in the Medicaid rebase.

“The Governor has been clear since March that the General Assembly needs to fully fund the Medicaid rebase, and he recently reiterated his concern when their Band-Aid budget fell $319 million short of what is needed to fund North Carolinians’ health care,” the spokesperson wrote. “Governor Stein continues to urge the legislature to do its job and pass a budget that stops these forced cuts.”

Written by Brandon Kingdollar, NC Newsline