Health Care vs. Tax Cuts: Who’s Winning
The Situation
The NC Budget process calls for the legislature to send a 2-year budget to the Governor to sign before the new fiscal year begins on July 1. This year that didn’t happen. The House and Senate couldn’t agree on an overall budget, or on a budget line item that would address a $190 million shortfall in the Medicaid budget caused by rising health care prices (known as the Medicaid rebase). Governor Stein called the Legislature back into session, but the Republican leadership refused to approve a new overall Budget or to address the shortfall. As a result, Stein asked the Department of Health and Human Services (DHHS) to begin trimming payments to Medicaid providers, including adult care homes.
Governor Stein’s justification for the cuts is clear; it would be reckless to spend at the current rate knowing that DHHS would run out of money at some point next year. With the General Assembly as yet unable to agree on a budget, the Governor decided to make cuts before the program ran out of funds. The General Assembly has called this a political ploy, claiming that the decision to begin trimming payments to providers is illegal. For now, the courts have agreed, temporarily blocking the Governor’s action on the grounds that he doesn’t have the authority to cut the appropriation since DHHS hasn’t yet run out of money. Faced with multiple lawsuits and no action from the General Assembly, Stein has now agreed to reverse the cuts, saying: “Legislators have said over and over that they will fund Medicaid….It’s time to stop talking about funding Medicaid. It’s time to start funding Medicaid. It’s not about politics. It’s about people’s lives.”
The Perspective
The state does have the money now to fully fund Medicaid services for the 3 million NC residents who depend on Medicaid for health care. Why, then, has the General Assembly failed to act? Because the Senate fears that increasing funding for Medicaid to keep up with the need for services will kill their plan to cut both corporate and individual taxes as proposed in the 2021-23 and 2023-25 Budgets.
The NC Budget and Tax Center estimates that if those planned tax cuts go into effect, by 2030 they will reduce the state budget for all services by $13 billion per year. According to the Budget and Tax Center,
This irresponsible plan will decimate the state’s ability to generate funds to pay for what North Carolinians rely on – public schools, parks, roads, clean water, and more – all but guaranteeing that major budget cuts, future tax increases, and/or revenue raising through gambling will be on the table in the coming years.
In other words, the NC legislature is willing to cut taxes now, regardless of the impact on the services we all depend on. This is the same strategy that has been put in place at the federal level by the Trump Administration with the budget legislation enacted by Congress that the President calls the Big Beautiful Bill. That Budget extended the 2017 tax cuts that were due to expire at the end of 2025, but blocked extension of the Biden era subsidies to the Affordable Care Act. Those Covid-era subsidies held health costs to 8.5% of income, enabling an estimated 12 million additional Americans to afford health care insurance under the ACA. According to our Governor, ending these subsidies will mean that 157,000 North Carolinians will become uninsured and another 888,000 will see their health care premiums double. All North Carolinians will pay more for coverage.
There is more bad news for access to health care in what I call the Big Bad Bill. While the elimination of subsidies goes into effect on Jan 1, approximately $800 billion in cuts to Medicaid over the next 10 years will not hit until the end of 2026. That date was chosen so that Americans wouldn’t feel the cuts before the 2026 elections. These cuts will disproportionately impact children, the elderly, and the disabled in rural areas; and new work requirements in the Bill will mean that an estimated 255,000 North Carolinians will lose Medicaid coverage.
The impact of all these cuts will even fall on Americans outside the ACA, largely because there are no constraints on the rising costs of health care in our privately funded health care system. The Petersen-KFF tracker estimates that premiums for individual and group health care insurance will go up 15-20% in North Carolina. The system-tracker attributes a large percentage of these cost increases to the concentration of insurance companies through mergers and buyouts in the 14 years since the ACA markets began. As a result of this increased concentration, there is less competition to keep prices down. Not only have premiums gone up, but more costs are passed on to customers – in substantial upfront deductibles and more copays. These changes mean that the cost of health care insurance premiums could go up as much as 75% higher if the ACA subsidies that kept costs down are allowed to expire.
Republicans are making a dangerous tradeoff by cutting taxes for the wealthiest while denying affordable healthcare to the neediest. The US spends more on health care than any other large, wealthy country, not because we deliver more health care or better health care, but because we simply have higher prices. Compared with other developed nations, we provide less care for 2-3 times more money.
The Future
As I write this, the funding for health care is still uncertain. Will the two NC Houses come to an agreement on a budget that Governor Stein can sign? Will Congress remember that its job is to represent the people and extend the subsidies for the ACA? Will state and federal legislators – worried about how their vote for tax cuts over all else will impact their chances for re-election in 2026 — choose instead to decrease proposed corporate and individual tax cuts so that we have the money for necessary public goods and services, including access to affordable health care? Or will they follow Trump’s lead and increase gerrymandering so that we, the people, don’t have the opportunity to elect representatives who will put our needs first? Do we still have a voice in our government?
The 2026 elections will give us the answers.
