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The state Capitol in Raleigh.

The N.C. Department of Health and Human Services said Thursday that a proposed $73 million cut to its allocation from the state could be “crippling.”

The reduction for DHHS’ 2019-21 budget is in the latest version of House Bill 555, which is the bill that aims to revamp the state’s Medicaid program.

Republican legislators inserted the Medicaid revamping language into HB555 in an attempt to provide at least $218 million in funding that’s locked up in the state budget dispute.

Sen. Ralph Hise, R-McDowell, said the $31 million cut for 2019-20 is projected to be offset by savings in other areas.

DHHS said the legislation represents “crippling cuts — the largest ever to DHHS — that will undermine the department’s ability to protect people’s health and safety.”

“It comes at a time when the department is undertaking the most significant and complex change in its history with the transition to managed care.”

The Senate Finance committee recommended HB555 Thursday to the Senate Rules and Operations committee, which is expected to address the bill Monday.

DHHS said the funding cut “ignores the hundreds of thousands of North Carolinians who need affordable health care. All of this in a time of a budget surplus” of nearly $900 million.

Key Republican legislative officials, particularly Senate leader Phil Berger, R-Rockingham, have called a non-starter the attempt to expand Medicaid coverage to between 450,000 to 650,000 North Carolinians within bipartisan House Bill 655.

Language in HB555 lists the cuts as justified because of projected lower administrative costs related to the Medicaid transformation initiative. The bill authorizes health Secretary Dr. Mandy Cohen to make sweeping cuts across all DHHS to achieve the requirement.

Hise said the $42 million funding reduction in 2020-21 can be offset by at least $20 million from DHHS shifting funding within its budget.

Quarterly tax assessment on hospitals and prepaid health plans operated by insurers would help pay for administrative costs in Medicaid transformation. Critical access and freestanding psychiatric and rehabilitation hospitals are exempt.

The assessments are controversial inclusions into HB555 given that many GOP legislative leaders, foremost Berger, oppose using them to pay for the state’s 10% share of additional Medicaid expansion administrative costs as proposed in HB655.

Health-care systems and PHPs operating in the state would pay $758 million annually in the HB655 legislation.

Berger has claimed the Medicaid expansion assessments eventually would become a pass-through tax onto consumers.

“There is actually a big difference between the assessments in these two bills as we see it,” Berger spokesman Bill D’Elia said.

“The ones in HB555 are there to aid with the transition to a Medicaid managed-care model, which will save the state money in the long run and further streamline the process of providing quality care for the traditional Medicaid population — low-income parents, children, pregnant women, the elderly, the blind and the disabled.

“The assessments in HB655, on the other hand, are there to fund the state’s cost of Medicaid expansion to provide health coverage to mostly able-bodied adults, which will likely cost the state billions of dollars in the long run when the federal government inevitably drops their match rate down from the current, unsustainable 90%.“

Medicaid expansion supporters say a significant number of potential beneficiaries are individuals and families who fall in the current coverage gap of making too much in household income to qualify now for Medicaid, but not enough to afford coverage on the federal health exchange.

For the 36 Medicaid expansion states and the District of Columbia, the federal government has been consistent even under the Trump administration in meeting its 90% contribution.

Rep. Donny Lambeth, R-Forsyth, and primary sponsor of HB655, told a House committee in July that the 90% federal government match is sustainable and would take an act of Congress to change.

Mark Hall, law and public-health professor at Wake Forest University, released a study in April 2018 titled “Do States Regret Expanding Medicaid?”

Hall said requiring hospitals to help pay for North Carolina’s 10% of new administrative costs “is not likely to increase costs to patients because hospitals will also see reduced uncompensated care.

“The two effects — tax and reduced uncompensated care — should be a wash.”

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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