North Carolina is facing a looming deadline to find more funding to cover new federal work requirements for Medicaid.
President Trump's megabill that became law last summer requires most Medicaid recipients to work, volunteer or receive job training at least 20 hours a week. But it will be up to state and county agencies to keep track of the requirement when it starts next year.
State health officials estimate that will cost around $50 million. But under North Carolina's Medicaid expansion law, that money can't come from state tax dollars. The law requires administrative funding to come from other sources, or Medicaid expansion will be automatically repealed.
Melanie Bush with the Department of Health and Human Services presented several funding options to a legislative committee Tuesday. They include using savings generated by Medicaid expansion or using revenue from taxes on hospitals.
“We are on a very tight timeline,” she told lawmakers. “We need legislative action as soon as possible, so that we can begin building and testing our systems and notifying our members and working with our counties to prepare for Jan. 1.”
Bush says that's needed by March 31, but lawmakers might not be in session until April.
“Timing here is, I think, an issue that we're going to think through,” said Rep. Donny Lambeth, R-Forsyth, who co-chairs budget and healthcare committees in the House.
Rep. Hugh Blackwell, R-Burke, voiced frustrations that the new Medicaid work requirements might not result in any savings to the state. Congress created the requirement with the expectation that it could lead to fewer people on Medicaid and lower overall costs for the healthcare program.
“The overall idea I'm getting from the department is you all feel that what you're going to be required to do, and what the county is going to be required to do, is just busy work that's going to add cost, and that there will be no savings anywhere as a result of all this new shuffling of policies,” Blackwell said.
Jay Ludlam, the state's deputy secretary for N.C. Medicaid, responded that "I don't know where the savings are going to fall over time, but at least initially, there will have to be some investments to get there."
Kevin Leonard, executive director of the N.C. Association of County Commissioners, said county governments will see substantial budget impacts as their social services agencies try to administer the new work requirements.
“HR 1 (the “One Big Beautiful Bill Act”) from the view of the North Carolina counties is one of the most significant unfunded mandates, and one of the largest shifts of administrative and economic responsibility, that our state and our counties have seen in generations,” Leonard said. “I have concerns that many of our (county) commissioners have yet to fully grasp the significant financial impacts of HR 1.”
SNAP work requirements also come with a cost
The cost of new federal requirements for the SNAP food assistance program could fall on county governments.
Two oversight committees at the state legislature held hearings Tuesday on the impacts of President Trump's megabill. In addition to Medicaid, the new law adds work requirements for the program known as food stamps, and it shifts costs to state and local governments.
SNAP recipients between ages 55-65 will no longer be exempt from work requirements, nor will parents of children over age 14, veterans or people experiencing homelessness.
Robby Hall leads the Brunswick County Department of Social Services. He says agencies like his will be responsible for making sure food stamp recipients meet the new requirements. That could cost counties in North Carolina a total of $70 million per year.
“We do believe that improvements in our system will help everyone in North Carolina, but we've got to find a way to do it that benefits the counties, the people and those individuals, without creating undue hardships,” Hall told legislators.
Hall says smaller counties might have to consider raising property taxes if the state doesn't help with the cost.
“If you're in a small rural community such as Scotland County or some of the others, then a couple $100,000 extra county dollars would be a penny on the tax rate or more, and so when you look at that, that investment becomes really hard,” he said.
At the state level, North Carolina could also be forced to pay up to $400 million a year under the federal SNAP changes.
But officials say recent improvements to the state's payment error rate could reduce that number. That’s because the megabill penalizes states with higher error rates, which is the percentage of benefits paid incorrectly — typically because the recipient’s eligibility was calculated wrong.
In 2024, North Carolina was one of 20 states with an error rate above 10%, which under the megabill rules would require the state to cover 15% of its SNAP costs.
But the N.C. Department of Health and Human Services told lawmakers Tuesday that the error rate has been reduced to about 7% as of August. The goal is to reduce it below 6%, which would mean the state wouldn’t be on the hook for the $400 million when the new rules take effect in October 2027.
“I'm very excited to see this progress,” said Mike Leighs, a DHHS deputy secretary. “I just want to add a note of caution, though … when we have seen increased complexity added to the program, we have seen a tendency for the error rates to climb.”
