Medicaid cuts coming Oct. 1. NC health groups urge state leader to halt them
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- DHHS plans $319M in Medicaid cuts absent new legislative funding by Oct. 1.
- North Carolina health care groups, in a letter, urged DHHS to pause the cuts.
- Lawmakers remain divided over Medicaid funding and unrelated hospital projects.
A coalition of health care groups is urging the state to halt cuts in payments to Medicaid providers scheduled for Oct. 1 so lawmakers can work out a resolution.
And while the head of the state’s hospital association has expressed optimism, the state’s Department of Health and Human Services has indicated it will proceed with cuts regardless of the request.
In mid-August, DHHS said it would start trimming $319 million by the end of September — including via across-the-board provider rate reductions and ending coverage for weight loss of popular glucagon-like peptide-1 drugs such as Wegovy — to meet an Oct. 1 deadline unless lawmakers intervened.
The reductions, separate from federal cuts in the “One Big Beautiful Bill,” stem from a Medicaid funding dispute. DHHS projected $819 million was needed for the Medicaid rebase — the funding required to maintain current services and provider payment rates. Lawmakers approved $319 million less than what DHHS says is needed, The News & Observer previously reported.
In a letter sent Wednesday to DHHS Secretary Dr. Devdutta Sangvai, the organizations — representing hospitals, doctors, nurses, long-term care facilities, home health agencies and other providers — said the cuts would compound financial strain by triggering the loss of federal matching funds as new federal reductions are set to phase in within the next year. They warned the timing could disrupt long-term planning and undermine care in both urban and rural communities.
While estimated reductions in Medicaid provider spending for fiscal year 2025-26 are expected to save the state $320 million, they will also result in a loss of $1.1 billion in federal funding. The federal government matches state funding for the Medicaid non-expansion population at approximately 65%. Cuts to providers can affect services offered.
“Our true bottom line and greatest responsibility is our ability to meet the needs of our patients and communities,” wrote the coalition, which includes the North Carolina Healthcare Association, Medical Society and Nurses Association.
The groups urged DHHS to allow for more time for the department and lawmakers to reach an agreement. They also want the department and the General Assembly’s Fiscal Research Division to work together to develop a consensus forecasting model for Medicaid rebase needs, saying it would create a “trusted and reliable” number to guide future budget decisions.
NC Healthcare Association President and CEO Josh Dobson, who shared the letter, told The N&O that many providers — and, he believed, both the House and Senate — agree “that the rebase number needs to be higher, so we’re going to advocate for that.”
Dobson said Sangvai had acknowledged the letter and told him “he would do his best to continue to work with us and work with providers and the General Assembly.”
“They have to balance the budget with the funds that they have. So I understand. So there’s no, there’s no commitment one way or another on that,” Dobson said.
Lawmakers are expected back in Raleigh next week, but it’s unclear if any additional Medicaid funding will be provided.
“I’m not ready to give up on some kind of consensus for next week,” Dobson said, “but I think it is fair to say that there is no deal at this moment.”
Meanwhile, DHHS said on Tuesday that without additional funding “the cuts must move forward as planned.”
“We do not want to take the extremely difficult step of making these significant reductions to NC Medicaid. However, without additional funding, this step is unavoidable. If funds are not appropriated, delaying these cuts past Oct. 1 would have devastating impacts to people, providers and communities that rely on NC Medicaid,” it said.
Dobson said “there will be challenges for hospitals, providers and payers. Everyone is going to have to make some tough decisions if we don’t figure this out.”
House and Senate negotiations
DHHS says the state budget office sent lawmakers information about an increased funding need in May.
DHHS then shared updated projections with lawmakers in mid-July for the Medicaid rebase for the fiscal year running July 1 to June 30, 2026.
The projections showed $819 million was required, up from the $700 million in Democratic Gov. Josh Stein’s budget request, which used January data, DHHS said.
Lauren Horsch, a spokesperson for Senate leader Phil Berger, said the legislature’s nonpartisan Fiscal Research came up with an estimate of $640 million and senators wanted to fund that amount, plus an additional $50 million for administration, but the House wouldn’t agree. (The N&O previously contacted Fiscal Research for its analysis, but the office deferred to lawmakers.)
Instead, in a mini-budget in late July, they included $600 million for the Medicaid rebase.
After administrative costs, only $500 million would go toward the Medicaid rebase, leaving a $319 million shortfall, DHHS said.
The GOP-led General Assembly has not passed a comprehensive state budget.
“We kind of have one number from a nonpartisan fiscal research division and one number that the governor kind of made up. We have to be fiscally responsible and use the number based on mathematics and reality,” Republican Rep. Grant Campbell, an OBGYN representing Cabarrus and Rowan counties, said in a video posted on X,
Campbell said House lawmakers had developed a plan to provide the full funding difference based on the Fiscal Research forecast, which would eliminate the need for any cuts in Medicaid. He added they were “pretty confident” Stein would accept that number if approved. DHHS is part of the governor’s Cabinet.
But Campbell said Senate leaders told House members in a Thursday meeting that they would only support the plan if it included $300 million for a children’s hospital in Apex. North Carolina Children’s Health Inc., a new pediatric hospital network being developed by Duke Health and UNC Health, has previously been a sticking point in budget negotiations between the chambers.
“That’s a discussion that can be had, but that’s an unrelated issue to the Medicaid rebase negotiations, and we do not want to hold hospitals, doctors and everybody else who is taking care of sick people hostage because one chamber of the General Assembly wants a project to pass through,” Campbell said.
“The House stands ready,” he added. “Certainly a disappointing update, but we’re going to keep working on that.”
Horsch said in an email that Campbell’s video “contains incorrect information.” She said the Senate is not asking for additional funds for NC Children’s. Instead, it’s asking for “the House to return to the 2023 funding agreement” for the hospital and NC Care, “which will help support our rural hospitals.”
In the 2023 budget, the legislature created a new program called NC Care, a partnership between ECU Health, UNC Health, and their medical schools. The legislature appropriated $420 million for the initiative aimed at improving access to health care in rural areas.
DHHS said it continued to work with legislative leaders to “find solutions that could delay or prevent these cuts altogether, and we remain optimistic that we can find agreement on a path forward that will support providers and the people who rely on Medicaid.”
Demi Dowdy, a spokesperson for House Speaker Destin Hall, said in an email that “House appropriators and health leaders have proposed a plan to fully fund Medicaid and prevent the NCDHHS’ politically-motivated cuts. We are hopeful that unrelated budget items will not hold up an agreement on this plan.”
This story was originally published September 16, 2025 at 12:55 PM with the headline "Medicaid cuts coming Oct. 1. NC health groups urge state leader to halt them."
