'Hurting ourselves': Red states slash Medicaid way ahead of Trump's budget taking effect

Every day for nearly 18 years, Alessandra Fabrello has been a medical caregiver for her son, on top of being his mom.

“It is almost impossible to explain what it takes to keep a child alive who should be dead,” said Fabrello, whose son, Ysadore Maklakoff, experienced a rare brain condition called acute necrotizing encephalopathy at 9 months old.

Through North Carolina’s Medicaid program, Maklakoff qualifies for a large slate of medical care in the family’s home in Chapel Hill. Fabrello said she works with staffing agencies to arrange services. She also learned to give the care ordinarily performed by a doctor, skilled nurse, or highly trained therapist because she often can’t get help.

Now, broad cuts to North Carolina Medicaid will make finding and paying for care even more difficult.

Nationwide, states are scrambling to close budget shortfalls and are eyeing Medicaid, generally one of a state’s biggest costs — even before President Donald Trump’s hulking tax-and-spending law decreases federal spending on Medicaid by about $1 trillion over the next decade.

North Carolina and Idaho have already announced plans to cut Medicaid payments to health care providers, including hospitals, doctors, and caregivers.

In Michigan and Pennsylvania — where lawmakers have yet to pass budgets this year — spending on Medicaid is part of those debates. In Washington state, lawmakers approved cuts to the program that will not affect who is eligible, said Hayden Mackley, a spokesperson for the state’s Office of Financial Management.

Medicaid is government health insurance for people with low incomes or disabilities and both state and federal dollars pay for the program.

North Carolina’s Medicaid agency announced it will institute on Oct. 1 a minimum 3% reduction in pay for all providers who treat Medicaid patients. Primary care doctors face an 8% cut and specialty doctors a 10% drop in payments, according to the North Carolina Department of Health and Human Services.

Fabrello said her son’s dentist already called to say the office will not accept Medicaid patients come November. Fabrello fears dental work will become another service her son qualifies for but can’t get because there aren’t enough providers who accept Medicaid coverage.

Occupational and speech therapy, nursing care, and respite care are all difficult or impossible to get, she said. In a good week, her son will get 50 hours of skilled nursing care out of the 112 hours he qualifies for.

“When you say, ‘We’re just cutting provider rates,’ you’re actually cutting access for him for all his needs,” Fabrello said.

Shannon Dowler, former chief medical officer for North Carolina Medicaid, said that reduced payments to dentists and other providers will lower the number of providers in the state’s Medicaid network and result in “an immediate loss of access to care, worse outcomes, and cause higher downstream costs.”

The imminent cuts in North Carolina “don’t have anything to do” with the new federal law that cuts Medicaid funding, Dowler said.

“This is like the layers of the onion,” she said. “We are hurting ourselves in North Carolina way ahead of the game, way before we need to do this.” North Carolina alone is projected to lose about $23 billion in federal Medicaid dollars over the next decade.

More than 3 million North Carolinians are enrolled in Medicaid. Deadlocked state lawmakers agreed to a mini budget in July to continue funding state programs that gave the Medicaid agency $319 million less than it requested. Lawmakers can choose to reinstate funding for Medicaid this fiscal year, Dowler said.

“We all hope it changes,” Dowler said, adding that if it does not, “you’re going to see practices dropping coverage of Medicaid members.”

Each year since at least 2019, North Carolina’s Medicaid agency has asked for more money than it received from the state legislature. A variety of federal resources, including money provided to states during the covid-19 pandemic, helped bridge the gap.

But those funds are gone this year, leaving the agency with a choice: Eliminate some optional parts of the program or force every provider that accepts the public insurance to take a pay cut. The state opted mostly for the latter.

“It’s a difficult moment for North Carolina,” said Jay Ludlam, deputy secretary for North Carolina Medicaid. The cut in the budget is “absolutely the opposite direction of where we really want to go, need to go, have been headed as a state.”

For Anita Case, who leads a small group of health clinics in North Carolina, the cuts make it harder to take care of the “most vulnerable in our community.”

Western North Carolina Community Health Services’ three clinics serve about 15,000 patients in and around Asheville, including many non-English-speaking tourism workers. Case said she will look at staffing, services, and contracts to find places to trim.

Idaho has about 350,000 people enrolled in Medicaid. This month, state leaders there responded to an $80 million state budget shortfall by cutting Medicaid pay rates 4% across the board.

The broad cuts have raised backlash from nursing home operators and patient advocacy groups. Leaders of one nursing home company wrote in a recent op-ed in the Idaho Statesman newspaper that 75% to 100% of the funding at their facilities comes from Medicaid and the cuts will force them to “to reduce staff or accept fewer residents.”

Idaho Department of Health and Welfare spokesperson AJ McWhorter said the state faced tough choices. It forecasted 19% growth in Medicaid spending this year.

The Idaho Hospital Association’s Toni Lawson said the financial strain will be greatest at about two dozen small hospitals — ones with 25 or fewer beds — that dot the state. Lawson, the organization’s chief advocacy officer, said one hospital leader reported they had less than two days’ cash on hand to make payroll. Others reported 30 days’ cash or less, she said.

“Hopefully, none of them will close,” Lawson said, adding that she expects labor and delivery and behavioral health units, which often lose money, to be the first to go because of this latest state reduction in payments. Several hospitals in mostly rural areas of the state closed their labor and delivery units last year, she said.

Nationwide, Medicaid makes up an average of 19% of a state’s general fund spending, second only to K-12 spending, said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers.

States generally had strong revenue growth in 2021 and 2022 because of economic growth, which included federal aid to stimulate the economy. Revenue growth has since slowed, and some states have cut income and property taxes.

Meanwhile, spending on Medicaid, housing, education, and disaster response has increased, Sigritz said.

In North Carolina, Fabrello has been unable to work outside of caring for her son. Her savings are almost exhausted, Fabrello said, and she was on the brink of financial ruin until North Carolina began allowing parents to be compensated for caregiving duties. She’s received that income for about a year, she said. Without it, she worried about losing her home.

Now, if the state reductions go through, she faces a salary cut.

“As parents, we are indispensable lifelines to our children, and we are struggling to fight for our own survival on top of it,” Fabrello said.

Subscribe to KFF Health News' free Morning Briefing.

This article first appeared on KFF Health News and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.