NC Republican Lawmakers Clash Over Medicaid and Children's Hospital Funding Amid Ongoing Budget Deadlock

Medicaid Funding Dispute

North Carolina lawmakers are currently facing a significant challenge in finalizing the state's full budget, with a particular focus on securing funding for various healthcare projects. However, this effort has hit a roadblock as leaders in the House and Senate disagree over the allocation of funds for a new children’s hospital and the state’s Medicaid program.

The Medicaid program is experiencing a financial shortfall due to a combination of reduced state funding and changes introduced by congressional Republicans' spending-and-tax cut bill. Officials have had to reassess the amount of money needed for the next fiscal year. Earlier this year, Medicaid leaders estimated that the "rebase" — the adjusted level of funding — would need to be $819 million. However, the stopgap spending measure passed this summer only provides $600 million, forcing the North Carolina Department of Health and Human Services (DHHS) to consider cutting $319 million in Medicaid spending by October 1.

Senate Republicans initially proposed around $640 million for the rebase, plus an additional $50 million for administrative costs. The House did not agree to this amount at the time. DHHS leaders have warned that the funding shortfall could lead to reduced reimbursements for healthcare providers serving over 3 million North Carolinians enrolled in Medicaid. While House leaders have indicated they may revisit Medicaid funding levels if adjustments are needed, Senate leaders are now considering a proposal that would increase the rebase to about $690 million for each of the next two years, along with nearly $50 million in administrative costs.

This preliminary proposal also suggests increased cuts to DHHS services related to mental health, developmental disabilities, and substance abuse.

Children’s Hospital Controversy

Complicating the Medicaid discussions is the ongoing debate over funding for a new standalone children’s hospital. North Carolina Children’s Health, a partnership between UNC Health and Duke Health, plans to build the state’s first standalone children’s hospital on 230 acres in Apex. This project, which is expected to bring thousands of jobs to western Wake County, relies heavily on state funding and is scheduled to open after 2032.

State Rep. Grant Campbell has claimed that state senators are holding up Medicaid funding talks over the hospital’s funding. Senate leader Phil Berger has been a strong advocate for the project, which is set to break ground in 2027. According to Campbell, the House proposed a plan to eliminate all Medicaid cuts, but Senate negotiators added conditions, demanding $300 million for the hospital in Apex.

Berger’s office has disputed this account, stating that the Senate is seeking to return to the funding levels established in the 2023 state budget. That budget authorized approximately $320 million over three fiscal years, with about $216 million already spent. The Senate is now seeking the remaining $103.5 million from that budget.

The Senate’s initial 2025 budget proposal included an additional $535.5 million for the 500-bed pediatric hospital, bringing total state funding to about $855.2 million — nearly 30% of the projected cost. However, the Senate has since scaled back its proposal to just the previously approved funds.

Other Budget Disputes

In addition to the Medicaid and children’s hospital issues, lawmakers are also at odds over about $105 million in previously-approved funding for a program supporting rural healthcare. Senate leaders support paying out this money, which is intended to assist rural hospitals.

Tax rates remain a major obstacle in the overall budget negotiations. The personal income tax rate is set at 4.25% this year and 3.99% in 2026. The chambers disagree on how to plan for tax cuts in 2027 and beyond. State economists have warned that declining revenues could leave North Carolina unable to meet its growing needs.

The Senate’s initial proposal called for reducing the personal income tax rate to 3.49% in 2027, while the House proposed a less aggressive approach. Democrats have criticized Republican leaders for not addressing urgent issues like inflation and rising food costs, pointing out that Republicans passed several “culture war” bills this summer but no comprehensive legislation to help residents.

Republicans, however, argue that they have a history of tax cuts and are working to provide the best possible raises for state employees. As lawmakers continue their negotiations, it remains unclear whether these disputes will delay or derail other key funding initiatives. Lawmakers are expected to return to Raleigh soon to resume discussions.