In a virtual meeting with health care providers and community partners Thursday afternoon, North Carolina Health Secretary Devdutta “Dev” Sangvai said upcoming cuts are a response to a “threat to the foundation of the Medicaid program.”
The call came a day after NC Newsline reported the North Carolina Department of Health and Human Services plans to cut Medicaid rates for all providers by 3% effective Oct. 1, with some areas of care like inpatient and residential services and research-based therapy for autism receiving up to 10% rate reductions — for a total of roughly $320 million in cuts. Sangvai first detailed these cuts to leadership of the General Assembly in a letter sent Monday.
The full impact to North Carolina health care providers will be substantially larger than the lost state dollars, as that reduction means a corresponding loss in federal matching funds. A table of rate cuts for different services provided by NCDHHS shows that if the planned reductions take place, patients in North Carolina will receive $1.1 billion less in Medicaid services.
Dr. Devdutta Sangvai, secretary of the North Carolina Department of Health and Human Services, talks with N.C. state Sen. Kevin Corbin after a Senate committee meeting. (Photo: Lynn Bonner/NC Newsline)Sangvai told providers the cuts to Medicaid programs will only further contribute to snowballing costs as health outcomes worsen and preventative care is unable to take place. He pointed to the end of coverage for GLP-1 drugs for weight loss and the end of the state’s Healthy Opportunity Pilots, testing non-medical interventions to improve overall health.
“You’re starting to see that some of those services that we have put in place with the idea of spending a little today to save a lot later are going to be suspended. This puts considerable pressure on the Medicaid program to actually bend the cost curve,” Sangvai said. “These were innovations that were put forward with the idea that we can actually lower total cost of care, but with the suspension of both of them, we will not be able to focus on that methodology.”
The cuts come primarily in response to what health officials said was a $319 million shortfall in funding from the General Assembly against the 2025-26 Medicaid rebase, the projected costs the state will incur funding Medicaid services, which stands at $819 million. While the legislature appropriated $600 million, only $500 million will go to the rebase, with the remainder designated for managed care oversight.
Julia Lurch, chief actuary and chief strategy officer for NCDHHS, said making the cuts has been a “very challenging exercise” and that months went into planning for scenarios where state funding fell short of their request.
“We understand that the reductions that I’m about to go through will have serious implications for our provider community as well as our beneficiaries that we are here to serve,” Lurch said. “We know that this will put some financial pressure on our provider partners and potentially lead to some providers stopping their service to our Medicaid beneficiaries due to unsustainable payment rates.”
Top Republican lawmakers dismiss DHHS assessment, vow to protect provider payments
While legislative Democrats indicated they hope the General Assembly will pass additional appropriations to avoid the cuts entirely, Republicans expressed doubts that the rate reductions are needed at all.
Rep. Donny Lambeth (R-Forsyth) wrote in an emailed statement Thursday that he believes the proposed cuts to be “unnecessary and jumping the starting line before legislators ask their questions and get answers.”
North Carolina Rep. Donny Lambeth (R-Forsyth), a lead House budget writer, outlines the chamber’s state budget proposal at a press conference on Tuesday, May 20, 2025. (Photo: Galen Bacharier/NC Newsline)“We have no plans to increase the allocation for the rebase. We have grave concerns with the lack of information shared with the General Assembly related to their proposed cuts,” Lambeth wrote. “I do not believe they need to cut rates and we will fight to protect payments to providers.”
Lambeth said the General Assembly’s Health and Human Services oversight committee, which he co-chairs, will probe the proposed cuts and will “dig deep into their budget” to understand why they came to be.
“The GA did not cut Medicaid. We provided 600 million in new funding and I want to understand why are cuts necessary,” he wrote. “I have not experience in my tenure such poor communication and lack of creativity.”
Republican leadership view the situation similarly, with spokespeople for Senate President Pro Tem Phil Berger (R-Rockingham) and House Speaker Destin Hall (R-Caldwell) calling for more responsible management of the NCDHHS budget and exploration of less severe cuts to services.
Rep. Pricey Harrison (D-Guilford), who attended a separate Medicaid information session on Wednesday, said while she has heard from providers opposed to the projected cuts, she has not yet heard from colleagues on the prospects for additional funding.
“It’s unfortunate, but I think the fault lies in us, in the legislature, for not providing the funding they need,” Harrison said. “I wish we’d get on the budget. I think that’s the bottom line.”
Rep. Sarah Crawford (D-Wake), who serves as CEO of the Tammy Lynn Center for Developmental Disabilities, said she hopes as information gets out, providers and patients push lawmakers to protect the health care they need.
“I certainly hope that we will be able to slowly fund the rebase or at least get a little bit closer so that we won’t have to have provider agencies sustaining these cuts,” Crawford said. “It is going to be very hard, particularly for some of the smaller providers, to figure out how to sustain these cuts.”
The General Assembly is slated to return on Aug. 26, the earliest any legislative action would likely take place regarding Medicaid funding.
Medicaid cuts by the numbers
NCDHHS Chief of Staff Jonathan Kappler stressed that “there’s no part of the Medicaid program that is not being touched by these funding issues,” walking providers through the rate cuts set to take effect in October on Thursday’s call.
Those cuts are slated to include reductions in staff, contracts, and other internal projects to reduce the overhead of the state Medicaid program, he said, though those changes have not yet been made public. “This is a shared burden for all of us,” he said.
The largest reduction in state Medicaid costs will come through a 10% rate cut to nursing home services, which the state projects will reduce spending by roughly $46.8 million. That’s followed by a 1.5% cut to pre-paid standard health plans operated by managed care organizations, health companies partnered by the state that operate Medicaid plans at a fixed cost, which the state projects will cut $44 million in spending.
According to Sangvai’s letter to General Assembly leadership, the reduction to the pre-paid plans will be retroactive to July 1 — though officials on the call Thursday indicated they expect the plan operators to bear those costs rather than health care providers themselves.
NC Medicaid director Jay Ludlam talks about the consequences of federal cuts to Medicaid at Martin Street Baptist Church in Raleigh on March 24, 2025. (Photo: Lynn Bonner)“There will be no retroactive action on the providers or clawback for any services between July 1 and September 30,” said Jay Ludlam, the Deputy Secretary for North Carolina Medicaid.
Ludlam also stressed that the changes taking place Oct. 1 will not remove any individuals from Medicaid. “We’re not cutting or changing eligibility. People are not losing Medicaid coverage because of these changes,” he said.
Officials said in early September, they aim to notify providers of rate changes through a bulletin as well as provide notice to Medicaid recipients about service reductions.
Halting coverage of GLP-1 drugs — commonly sold as Ozempic or Wegovy — for weight loss will cut costs by another $34 million, the state projects. And reducing rates for inpatient services by 10% is expected to reduce the rebase by $33.3 million. When combined with federal dollars, that is projected to represent a $209 million loss for providers in the state.
In addition to the services directly affected by the largest cuts, Crawford said the rate reduction has the potential to endanger additional programs that were already operating at a loss.
“We have a number of programs at [Tammy Lynn Center] where the Medicaid reimbursement rate does not fully fund the cost of providing services, and that includes things like respite care, which is a lifeline,” Crawford said. “What provider agencies or hospitals have to do is really look at how they do blended services to come out on the bottom line not totally in the red.”
Stephanie Strickland, a spokesperson for the North Carolina Healthcare Association, which advocates for the state’s hospitals, wrote in an emailed statement that they are still evaluating the full impact of the cuts.
“We are concerned about how these cuts could affect hospitals’ ability to care for Medicaid beneficiaries and the broader community,” Strickland wrote. “We look forward to working with our partners in the General Assembly and at NCDHHS to explore alternative approaches to achieving Medicaid savings. Once our analysis is complete, we will issue a more detailed statement on behalf of our membership early next week.”
In an effort to help steel rural health facilities against the state cuts and federal changes to the Medicaid program, NCDHHS announced Thursday that it would apply for funding from the Rural Health Transformation program.
Medicaid Services Reductions August 2025Significant cuts for patients with disabilities
Advocates raised concerns that some of the steepest cuts under the new Medicaid rates will impact services that are crucial to patients with disabilities, such as behavioral therapy and intensive care services.
Research-based behavioral health therapy and applied behavioral analysis services, which largely aid patients with autism, will receive a 10% rate cut, reducing state spending by about $17.4 million. On Thursday’s call, NCDHHS assistant secretary Melanie Bush said the cuts are in response to “exponential growth” in available behavioral health services and their increased use by Medicaid beneficiaries.
“We absolutely want children who have autism to receive the services they are medically necessary for,” Bush said. “We are just simply trying to curb the over-utilization that we feel is happening based on our conversations with other state Medicaid programs and how we’ve seen it implemented over the last year.”
Rep. Sarah Crawford (D-Wake) (Photo: ncleg.gov)The state is also cutting $13.2 million to intensive care facility services for individuals with intellectual disabilities, which Crawford said will impact patients who need “total personal care,” including assistance bathing and feeding.
“Those services are very costly. It takes a lot of staff to run those services for a long time,” she said. “Staff were getting paid $9, $10, $12 an hour — because of rate increases, a lot of providers have been able to bring pay up to $15, to $18 an hour depending on the provider, and that’s important to be able to keep up with just the cost of living.”
Corye Dunn, the director of public policy for Disability Rights North Carolina, said in an interview that the rate cuts are likely to only worsen longterm staffing issues in the disability care space.
“We have a real shortage of what we call direct support professionals, people who are providing that kind of hands-on care to people with disabilities,” Dunn said. “Any kind of rate cuts put pressure on pay for direct support professionals and others in the space, and that’s just going to make it much harder for people with disabilities to get their needs met.”
David Laxton, a spokesperson for the Autism Society of North Carolina, wrote in an email that these cuts will “significantly harm our organization and other providers serving North Carolina’s autism community.”
Many providers serving patients with autism operate on thin margins, he wrote, including his own organization. Cuts to Medicaid rates would likely force providers to reduce services or shut down programs entirely, he added.
“Medicaid enables people with autism to live more independently in their homes and communities, ultimately saving taxpayers money,” he wrote. “These proposed changes would hurt the very individuals Medicaid is intended to support — people with autism and other intellectual or developmental disabilities. We are actively working with legislative leaders to reduce the impact on these critical Medicaid services.”
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