Trump plan to shift cost of health, food benefits to the states will cost North Carolina billions

by Lynn Bonner, NC Newsline
September 5, 2025

A top state health administrator gave members of the state’s Child Fatality Task Force an update on some of the expensive challenges facing North Carolina that, left unresolved, could result in increased hunger and untreated illnesses.

The federal mega-bill that cut social welfare programs will potentially undo Medicaid expansion in the state, and it could leave North Carolina with a big bill for the Supplemental Nutrition Assistance Program, or SNAP.

Additionally, the state Department of Health and Human Services is set to make cuts to provider’s Medicaid payments because it says the state legislature has not provided enough money to maintain the status quo in the health insurance program.

“There’s a lot happening all at once,” Jonathan Kappler, chief of staff and deputy secretary for external affairs at the state Department of Health and Human Services told the task force.

SNAP helps about 1.4 million North Carolinians pay for food. The federal government used to pay all the benefit costs, but the bill President Donald Trump signed into law in July requires states to pick up a share of the expenses based on their payment error rates. That part of the law kicks in in a few years.

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The federal government will continue to pay the entire cost for states with error rates below 6%.

North Carolina’s error rate in 2024 was 10.21%, according to the USDA. States with error rates over 10% will pay 15% of benefit costs. The bill for North Carolina would come to $420 million, Kappler said. The cost calculations will be based on state error rates in  2025 or 2026.

Beginning next year, the federal government will no longer split SNAP administrative costs with the states 50-50, but will pay 25%.

County workers determine eligibility, and DHHS is working with counties to drive down the error rate, Kappler said.

President Donald Trump, joined by Republican lawmakers, holds a gavel after signing the “One, Big Beautiful Bill” Act into law during an Independence Day military family picnic on the South Lawn of the White House on July 4, 2025 in Washington, D.C. (Eric Lee/Getty Images)

County workers also have to monitor revised work requirements for adults using SNAP and, in 2027, new work requirements for people ensured under Medicaid expansion.

“There’s a lot of additional pressure on counties,” Kappler said.

Sen. Jim Burgin (R-Harnett), a task force member, brought up the concerns of grocers who worry about SNAP benefit reductions leading to reduced sales.

“I’ve met with the folks from Food Lion and some of the other grocery stores, and it’s a significant amount of money, and they’re concerned about it,” he said. SNAP payments amount to 18% of some stores total sales.

Medicaid changes

The federal law caps the provider tax North Carolina uses to pay the non-federal cost of Medicaid expansion. The federal government pays 90% of expansion costs, while the provider taxes pay 10%.

New costs for Medicaid expansion administration will outpace funding, “and that would end Medicaid expansion in North Carolina,” Kappler said. Discussions about how to pay for the increased administrative costs have begun, he said.

More than 675,000 North Carolinians are enrolled in expanded Medicaid, according to DHHS.

The federal law will result in North Carolina losing about $50 billion over 10 years, Kappler said. Most of that will show up as reduced payments to hospitals. Rural hospitals will be hit hard.

The federal law included a $50 billion rural health fund. Half the money will be distributed evenly among the states with approved applications. The Centers for Medicare and Medicaid Services will decide where the other $25 billion will go.

The $50 billion in federal money adds up to about one-third of the estimated loss of Medicaid funds in rural areas, KFF reported.

The stopgap budget the legislature passed in July had $319 million less than DHHS asked for to maintain the status quo in the Medicaid program. In response, DHHS Secretary Dev Sangvai outlined provider rate cuts scheduled to start Oct. 1.

Burgin said legislators are going to try to make sure provider rates aren’t cut.

“We’re planning on coming back and working on it,” he said.

Kappler said “productive discussions” about the Medicaid shortfall are ongoing, and there’s a way to avoid cuts now,  if not for the entire fiscal year.

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