House budget proposal caps county Medicaid costs, provides $35 million in targeted relief in 2006-07

The House Subcommittee on Health and Human Services on June 8 recommended permanently capping county Medicaid costs at 2005-06 levels and providing additional one-time relief to counties most impacted by the county Medicaid burden. The recommendations mark the most significant legislative action yet taken to relieve counties from their Medicaid burden.

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“This is the most promising action for county Medicaid relief to ever emerge from a legislative committee,” said NCACC Executive Director David F. Thompson. “We are grateful that the subcommittee recognizes the strain that the county Medicaid burden is putting on county budgets and remain hopeful that the full Legislature will endorse this proposal.”

Legislative fiscal staff estimates that the cap will cost the state $18 million in 2006-07. The proposal also sets aside additional one-time funds in the amount of $35 million for targeted relief. All counties will receive part of the $35 million, with more going to counties with the highest Medicaid populations.

North Carolina is the only state that requires counties to pay a fixed percentage of the state’s Medicaid share, even though the state and federal governments make all decisions regarding eligibility, services and reimbursement rates. This burden is forcing many counties to raise property taxes significantly or cut services to meet their constitutional mandate to provide schools. The county Medicaid share has increased by nearly 90 percent since 2000. In 2005-06, 45 counties increased property taxes, including 19 counties that raised property taxes by at least 10 percent.

“Those kinds of increases are unsustainable,” said Thompson. “Medicaid costs are growing faster than county revenues can keep up, forcing counties to either raise property taxes or cut other critical services, including county funds for education.”

The Medicaid burden is making it difficult for many counties to keep up with the exploding demand for classroom space due to legislative mandates for smaller class sizes in the lower grades and the state’s growing school population. According to the U.S. Census Bureau, North Carolina had the fourth-highest increase in the number of elementary school-age children from 2000-03, trailing only Texas, Florida and Arizona. North Carolina also ranked No. 4 in the increase in high school students in that same span. A recent survey by the North Carolina Department of Public Instruction identified nearly $10 billion of school capital needs in the state. More than 170,000 students in North Carolina currently attend school in mobile classrooms.

“Counties across the state are struggling to meet the demands for new classroom space as well as other needs for their communities, like public safety and public health,” said NCACC President Kitty Barnes, chair of the Catawba County Board of Commissioners. “One of the best decisions the General Assembly could make for public education would be to eliminate the county Medicaid share.”