An Update on ACA Medicaid Expansion: What to Watch in North Carolina and Beyond

North Carolina started implementation of the ACA Medicaid expansion on December 1, 2023, after becoming the 41^st state to adopt the Affordable Care Act (ACA) Medicaid expansion when Governor Roy Cooper signed legislation earlier this year. Expansion will be implemented in conjunction with other major delivery system reforms and activities to address social determinants of health and reduce disparities. North Carolina is the first state since Virginia in 2018 to adopt Medicaid expansion through a legislative process; the last six states after Virginia (Idaho, Missouri, Nebraska, Oklahoma, South Dakota, and Utah) adopted expansion through ballot initiatives. North Carolina is the largest state since Pennsylvania in 2015 to expand Medicaid.

As North Carolina starts implementation of the ACA Medicaid expansion, CMS under the Biden administration urges the 10 remaining non-expansion states to adopt the ACA Medicaid expansion, though the administration has little power to encourage expansion. At the same time, former President Trump announced he would renew efforts to replace the ACA if elected again, which could put coverage and financing under the Medicaid expansion at risk. If all remaining states adopted the Medicaid expansion, approximately 3.5 million uninsured adults would become newly eligible for Medicaid. This policy watch examines implications for expansion in North Carolina as well as key issues to watch in North Carolina and across other states.

How many adults could be covered under Medicaid expansion in North Carolina?

An estimated 600,000 adults are newly eligible for full Medicaid coverage under the Medicaid expansion. Coverage expanded to nearly all nonelderly adults with incomes up to 138% of the Federal Poverty Level (FPL) ($34,307 for a family of three in 2023) on December 1 in North Carolina. Prior to expansion, North Carolina Medicaid income eligibility limits were 37% FPL for parents ($9,198 for a family of three in 2023) and 0% for other adults. KFF estimates that 173,000 uninsured adults fell into the coverage gap (because they had income above Medicaid limits but below poverty and were therefore not eligible for premium subsidies in the ACA Marketplace). Recent estimates from the state show that the 600,000 people eligible under expansion include 200,000 individuals not currently enrolled in Medicaid, 300,000 individuals who were enrolled in family planning-only benefits (which provides enrollees limited coverage of reproductive health services), and 100,000 individuals who may have lost full Medicaid coverage in the absence of expansion as the state resumed redeterminations due to the unwinding of the continuous enrollment provision. In November, individuals in family planning coverage were automatically moved to full coverage to be able to receive full coverage on December 1.

North Carolina is using an array of communication and outreach strategies to help enroll eligible individuals in expansion. The state is working with community partners to help people get enrolled in coverage. In October, the North Carolina Department of Health and Human Services launched a new website with basic information about expansion including who is eligible, what benefits are covered, and how to apply, as well as a toolkit of English- and Spanish-language resources for providers and organizations to conduct outreach about the state’s expansion of Medicaid. The toolkit includes flyers, social media graphics and posts, a video on how to apply for coverage online, and other resources. The state is also providing outreach training, volunteer opportunities, and other tools, such as deliveries of printed materials for people who want to conduct outreach in their communities. In November, the state started sending text messages, phone calls, and emails to notify up to 300,000 Family Planning program enrollees about their automatic enrollment in full coverage.

What factors contributed to North Carolina expanding Medicaid?

Expansion had longstanding support from Governor Cooper but took a few years to gain consensus in the state legislature. In prior years, Cooper proposed Medicaid expansion in his state budget proposals; however, the Republican-controlled legislature did not include expansion in the final budgets. In 2019, debate over Medicaid expansion resulted in a budget impasse. In 2021, the budget omitted expansion but established a legislative committee to study Medicaid expansion. In 2022, both chambers of the legislature, under Republican leadership and with near unanimous support from both parties, passed bills related to Medicaid expansion; however, neither bill advanced due to disagreements between the two chambers on unrelated provisions.

Financial incentives from the federal government helped to gain new support from Republican legislators. Under the ACA, states receive a 90% federal matching rate (FMAP) for adults covered through the ACA expansion, a higher share than it does for traditional Medicaid enrollees. In 2021, the temporary fiscal incentive under the American Rescue Plan Act (ARPA) reignited discussion around Medicaid expansion in a few non-expansion states, including North Carolina. Under ARPA, states that newly adopt expansion are eligible for an additional 5 percentage point increase in the state’s traditional FMAP for two years, resulting in a temporary net fiscal benefit for these states. New support for adopting Medicaid expansion among Republican lawmakers was attributed to the fiscal incentives among other reasons for their change in opinion. At the time of passage of the state budget, the Joint Conference Committee estimated the ARPA incentive would bring a fiscal benefit of about $1.5 billion over two years and appropriated many of these funds to health-related initiatives. Additionally, the legislation adopting Medicaid expansion authorized the Healthcare Access and Stabilization Program (HASP), a directed payment program funded through increased hospital assessments that provides eligible hospitals with supplemental payments. According to the state, Medicaid expansion and HASP will allow the state to receive more than $8 billion each year from the federal government.

The substantial body of research pointing to largely positive effects of expansion may have also been a consideration in adopting expansion. Although it appears financial incentives were a primary motivator for state legislators formerly opposed to Medicaid, the Joint Legislative Committee on Access to Healthcare and Medicaid Expansion was presented with findings on the impact of Medicaid expansion. KFF reports published in 2020 and 2021 reviewed more than 600 studies and concluded that expansion is linked to gains in coverage, improvement in access and health, and economic benefits for states and providers. More recent studies generally find positive effects related to more specific outcomes such as improved access to care, treatment and outcomes for cancer, chronic conditions, sexual and reproductive health, and behavioral health. Studies also point to evidence of reduced racial disparities in coverage and access, reduced mortality, and improvements in economic impacts for providers (particularly rural hospitals) and economic stability for individuals.

What to watch moving forward?

How will expansion intersect with other ongoing and planned reforms in North Carolina? In addition to Medicaid expansion, North Carolina is also implementing major delivery system reforms and activities to address social determinants of health and reduce disparities. Beginning July 1, 2021, North Carolina implemented its first Medicaid managed care organization (MCO) program with the launch of MCO “Standard Plans,” offering integrated physical and behavioral health services statewide, with mandatory enrollment for most population groups; most expansion enrollees will receive coverage through Standard Plans. The state also recently submitted an 1115 waiver extension request that includes requests to cover a set of pre-release services for justice-involved individuals and to expand the Healthy Opportunities Pilots program that covers non-medical services that address specific social needs linked to health outcomes. The implementation of Medicaid expansion extends Medicaid coverage to more North Carolinians who could be eligible for these services.

How will Medicaid expansion intersect with unwinding of the continuous enrollment provision and what will be the effect on the uninsured? All states are currently conducting redeterminations for all Medicaid enrollees due to the unwinding of pandemic-related eligibility protections. During unwinding, states will disenroll those who are no longer eligible or who may remain eligible but are unable to complete the renewal process. North Carolina began Medicaid disenrollments in July 2023, and as of November 2023, 181,375 enrollees were disenrolled. Without expansion, adults disenrolled from Medicaid with incomes below poverty may have fallen into the coverage gap but now could be eligible for expansion coverage. Managing the unwinding in conjunction with implementing expansion may require additional eligibility and enrollment staff to help manage the volume of renewals and new applicants simultaneously. While many states may experience increases in the number of people uninsured as people are disenrolled from Medicaid coverage, North Carolina could see reductions in the uninsured as more adults become eligible and enroll in expansion coverage.

What does this mean for other non-expansion states? Looking ahead expansion could be a federal election issue as the Biden administration continues to encourage states to adopt expansion and has also proposed measures to cover people in states that do not expand. At the same time, Republican presidential candidates, including former President Trump and Governor Ron DeSantis, have called for renewed efforts to repeal and replace the ACA. In addition, Governor DeSantis of Florida and former Governor of South Carolina Nikki Haley have opposed Medicaid expansion in their states. While a number of states have been able to adopt expansion through a ballot measure, that option is not available to most other non-expansion states. At the state level, Medicaid expansion was a topic in the recent Mississippi gubernatorial race, but Governor Tate Reeves was re-elected in 2023, taking expansion off the table. Expansion is unlikely to be a major issue in upcoming statewide gubernatorial elections, as none of the remaining non-expansion states have a gubernatorial election in 2024; however, there could be changes in the make-up of state legislatures. Some states to watch include Kansas and Wisconsin, where Democratic governors have continued to support expansion. Kansas’ governor recently re-initiated discussion of Medicaid expansion, but it is unclear if the state legislature will take-up the proposal.