Budgeting for anticipated expenses is a key element to fiscal responsibility, just as ensuring that the tax code is adequate to meet those expenses and the needs in communities.
Unfortunately, the N.C. House of Representatives’ budget has failed to pursue this approach in the area of providing quality, affordable health insurance to low-income North Carolinians with disabilities, the elderly, children, and pregnant women.
The budget proposal they approved earlier this month introduced a Medicaid rebase nearly $40 million lower than the Governor’s budget. It also includes a management flexibility cut of $15 million that may result in the need for reductions in administrative oversight at a critical moment in the transformation of the Medicaid system in our state. Last year, the General Assembly underfunded the rebase by nearly $28 million.
While rebase adjustments are only cost estimates based on anticipated changes to enrollment, utilization, costs, rates, and more, there is no advantage to underestimating these costs and, in fact, it compromises the budget process altogether by failing to show the true expenses the state should be meeting.
In years past, inadequate rebase allocations have meant that the General Assembly has to come up with funds at a later date in order to make up the difference, leading to challenges when balancing the state’s budget with available revenue. This is because Medicaid is an entitlement program, meaning that people who apply and meet eligibility criteria are entitled to receive services.
November will also mark the start of North Carolina’s shift to Medicaid managed care, which will involve paying private insurance companies on a per member per month basis to manage the physical and behavioral health needs of those enrollees. While the thinking is that Medicaid transformation will create savings for the state, this expected net savings will take place over time, and it would therefore be prudent for state lawmakers to carefully allocate funds to this area.
Of course, there are also limitations in the state budget thanks to tax cuts introduced since 2013, which have severely limited North Carolina’s ability to generate revenue and invest in our state.
This year alone, the tax cuts that took effect in January resulted in $900 million loss to expected revenue for the upcoming fiscal year, and a current proposal in the Senate would be another blow to the state’s dwindling revenue, worsening the structural deficit.
Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.
