Easley demands Medicaid relief for struggling counties

• Projected 2007-08 county Medicaid costs: XLS | PDF

During his State of the State address Monday night to the General Assembly, Gov. Mike Easley addressed the impact Medicaid is having on “low-wealth” counties and urged legislators to “face and fix this problem, this session.”

More on Medicaid relief

“If any of our counties are weak, then all of us are weaker for it,” Easley said. “We have to work together to help those low-wealth counties that are struggling with the high cost of Medicaid. And I know that the [State and Local Fiscal Modernization Study Commission] is working hard on a solution. They are due to make a recommendation to us next month. If we don’t get a timely and reasonable recommendation, we will offer our own plan. But one way or another, we need to face and fix this problem, this session.”

“Gov. Easley clearly understands the fiscal dilemma that Medicaid places on our counties as evidenced by his strong call for the Legislature to address this issue this session,” said NCACC Executive Director David F. Thompson. “We will work with the governor and the General Assembly to find a solution that addresses the funding challenges being faced by all of our counties.”

A 2006 survey by the N.C. Department of Public Instruction revealed approximately $9.7 billion of school capital needs over the next five years to handle the state’s rapidly growing population and to accommodate mandates for smaller class sizes in the lower grades. Combined with rapidly growing Medicaid expenses, many North Carolina counties are facing a fiscal crisis. For 2006-07, 50 counties are budgeted to spend more for Medicaid services than they do on school construction, renovation and other capital needs. As a result, counties are seeking permanent relief from the escalating Medicaid costs and additional revenue authority to meet demands for public schools and other infrastructure needs.

In 2005-06, North Carolina counties paid nearly $426 million to subsidize the state’s Medicaid share. State legislators did provide a one-time appropriation of up to $27.4 million in the 2006-07 budget to temporarily cap county Medicaid costs at 2005-06 levels. If the cap is not continued, state officials are already projecting county Medicaid costs to surpass half a billion dollars in 2007-08. The latest projections from the Division of Medical Assistance show the county share is projected to jump to $517 million for 2007-08 – an increase of 21 percent over the 2005-06 capped amount.

“The county revenue structure cannot keep up with the demands that are being placed upon counties,” Thompson said. “Medicaid is growing at about 10 percent a year, and the thousands of new citizens entering our counties every month are creating greater demand for services. Over the past two budget cycles, 62 counties were forced to raise property taxes to keep pace with rising Medicaid costs and the increased demands resulting from our growing population.”

The U.S. Census Bureau projects North Carolina to be the nation’s seventh-most populous state by 2030 with more than 12 million citizens. From July 1, 2000, through July 1, 2006, the Census Bureau estimated that North Carolina’s population increased by nearly 800,000 residents, putting even greater strain on county budgets.