Healthcare Investment Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 3
SENATE BILL 405
Health Care Committee Substitute Adopted 4/16/25
House Committee Substitute Favorable 10/22/25

Short Title: Healthcare Investment Act. (Public)
Sponsors:
Referred to:
March 25, 2025
*S405-v-3*
A BILL TO BE ENTITLED 1
AN ACT TO ADJUST MEDICAID FUNDING TO ACCOUNT FOR PROJECTED CHANGES 2
AND MAKE OTHER REVIS IONS TO LAWS GOVERNI NG THE DEPARTMENT OF 3
HEALTH AND HUMAN SER VICES AND TO REDUCE FUNDING APPROPRIATED 4
TO THE FUTURE BUILDI NG RESERVES AND THE STATE CAPITAL AND 5
INFRASTRUCTURE FUND. 6
The General Assembly of North Carolina enacts: 7
8
PART I. MEDICAID REB ASE AND OTHER DEPART MENT OF HEALTH AND 9
HUMAN SERVICES REVISIONS 10
11
MEDICAID REBASE AND MANAGED CARE ADMINISTRATION 12
SECTION 1.1. Section 2B.10 of S.L. 2025-89 reads as rewritten: 13
"SECTION 2B.10. SECTION 2B.10.(a) There is appropriated from the General Fund to 14
the Department of Health and Human Services, Division of Health Benefits, the sum of six 15
hundred million dollars ($600,00 0,000) six hundred ninety million dollars ($690,000,000) in 16
recurring funds and associated receipts for each year of the 2025-2027 fiscal biennium. receipts, 17
beginning with the 2025-2026 fiscal year. These funds shall be used to adjust Medicaid funding 18
to account for projected changes in enrollment, enrollment mix, service and capitation costs, and 19
federal match rates, as well as the implementation of the Children and Families Specialty Plan in 20
December 2025 or for contracts needed to operate the State's Medicaid managed care 21
program.2025. 22
"SECTION 2B.10.(b) There is appropriated from the General Fund to the Department of 23
Health and Human Services, Division of Health Benefits, the sum of forty-nine million two 24
hundred thousand dollars ($49,200,000) in recurring funds and associated receipts , beginning 25
with the 2025-2026 fiscal year. There is appropriated from the ARPA Temporary Savings Fund 26
to the Department of Health and Human Services, Division of Health Benefits, the sum of 27
thirty-four million four hundred thousand dollars ($34, 400,000) in nonrecurring funds and 28
associated receipts for the 2025-2026 fiscal year. These funds shall be used for contracts needed 29
to operate the State's Medicaid managed care program." 30
31
LME/MCO INTERGOVERNMENTAL TRANSFERS 32
SECTION 1.2.(a) The local management entities/managed care organizations 33
(LME/MCOs) shall make intergovernmental transfers to the Department of Health and Human 34
Services, Division of Health Benefits (DH B), in an aggregate amount of eighteen million 35
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 405-Third Edition
twenty-eight thousand two hundred seventeen dollars ($18,028,217) in the 2025-2026 fiscal year 1
and in an aggregate amount of eighteen million twenty -eight thousand two hundred seventeen 2
dollars ($18,028,217) f or the 2026 -2027 fiscal year. The due date and frequency of the 3
intergovernmental transfer required by this section shall be determined by DHB. The amount of 4
the intergovernmental transfer that each individual LME/MCO is required to make in each fiscal 5
year shall be as follows: 6
2025-2026 2026-2027 7
Alliance Behavioral Healthcare $4,508,857 $4,508,857 8
Partners Health Management $3,544,348 $3,544,348 9
Trillium Health Resources $6,448,693 $6,448,693 10
Vaya Health $3,526,319 $3,526,319 11
SECTION 1.2.(b) In the event that a county disengages from an LME/MCO and 12
realigns with another LME/MCO during the 2025 -2027 fiscal biennium, DHB shall have the 13
authority to reallocate the amount of the intergovernmental transfer that each affected 14
LME/MCO is required to make under subsection (a) of this section, taking into consideration the 15
change in catchment area and covered population, provided that the aggregate amount of the 16
transfers received from all LME/MCOs in each year of the fiscal biennium is achieved. 17
18
SINGLE-STREAM FUNDING REDUCTION 19
SECTION 1.3. Section 2B.5 of S.L. 2025-89 reads as rewritten: 20
"SECTION 2B.5.(a) The funds appropriated for each year of the 2025-2027 fiscal biennium 21
to the Department of Health and Human Services, Division of Mental Health, Developmental 22
Disabilities, and Substance Use Services (DMH/DD/SUS), for single -stream funding shall be 23
reduced by eighteen million five hundred sixty -two thousand six hundred forty -five dollars 24
($18,562,645) thirty million dollars ($30,000,000) in recurring funds.funds, beginning with the 25
2025-2026 fiscal year. 26
"SECTION 2B.5.(b) During each year of the 2025-2027 fiscal biennium, each LME/MCO 27
shall offer at least the same level of service utilization as during the 2024-2025 fiscal year across 28
the LME/MCO's catchment area. This requirement shall not be construed to require LME/MCOs 29
to authorize or maintain the same level of services for any specific individual whose services 30
were paid for with single -stream funding. Further, this requirement shall not be construed to 31
create a private right of action for any person or entity against the State of North Carolina or the 32
Department of Health and Human Services or any of its divisions, agents, or contractors and shall 33
not be used as authority in any contested case brought pursuant to Chapter 108C or 108D of the 34
General Statutes." 35
36
USE OF OPIOID SETTLEMENT FUNDS 37
SECTION 1.4.(a) The following definitions apply in this section: 38
(1) DMH/DD/SUS. – The Department of Health and Human Services, Division 39
of Mental Health, Developmental Disabilities, and Substance Use Services. 40
(2) Opioid Abatement Fund. – The Fund created by Section 9F.1 of S.L. 41
2021-180, as amended by Section 9F.1 of S.L. 2022-74. 42
(3) Opioid Abatement Reserve. – The Reserve created by Section 9F.1 of S.L. 43
2021-180, as amended by Section 9F.1 of S.L. 2022-74. 44
SECTION 1.4.(b) The funds appropriated from the General Fund to the 45
DMH/DD/SUS for each year of the 2025 -2027 fiscal biennium, for Single Stream Funding, are 46
reduced by the sum of fourteen million dollars ($14,000,000) in recurring funds. 47
SECTION 1.4.(c) The Prescription Digital Therapeutics Pilot Program authorized 48
by Section 9F.2 of S.L. 2022-74 is repealed. 49
SECTION 1.4.(d) The State Controller shall transfer the sum of one million eight 50
hundred fifty thousand dollars ($1,850,000) in nonrecurring funds for the 2025-2026 fiscal year 51
General Assembly Of North Carolina Session 2025
Senate Bill 405-Third Edition Page 3
from funds available in the Opioid Abatement Fund (as a result of the repeal of the Prescript ion 1
Digital Therapeutics Pilot Program authorized by subsection (c) of this section) to the Opioid 2
Abatement Reserve. 3
SECTION 1.4.(e) The State Controller shall transfer the sum of fourteen million 4
dollars ($14,000,000) in recurring funds for each year of the 2025-2027 fiscal biennium from 5
funds available in the Opioid Abatement Reserve to the DMH/DD/SUS. The DMH/DD/SUS 6
shall use these funds to offset the reduction in Single Stream Funding authorized by subsection 7
(b) of this section. The funds transferred pursuant to this section are appropriated for the fiscal 8
year in which they are transferred. 9
10
DHHS MANDATORY VACANT POSITION ELIMINATIONS 11
SECTION 1.5.(a) By January 1, 2026, the Department of Health and Human 12
Services shall eliminate vacant positions to achieve net General Fund savings in the amount of 13
thirty-three million nine hundred eighty -six thousand five hundred thirty dollars ($33,986,530) 14
in recurring funds for each year of the 2025-2027 fiscal biennium. 15
SECTION 1.5.(b) To achieve the net General Fund savings required by subsection 16
(a) of this section, the Department of Health and Human Services shall do one of the following: 17
(1) Adhere to the following schedule that sets forth the budgeted reduction to be 18
achieved by each division through vacant position eliminations: 19
20
FY 2025-2026 FY 2026-2027 21
Division of Aging $31,474 $31,474 22
Division of Central Management and Support 2,994,532 2,994,532 23
Division of Child and Family Well-Being 1,419,611 1,419,611 24
Division of Child Development and Early Education 104,617 104,617 25
Division of Employment and Independence for 519,409 519,409 26
People with Disabilities 27
Division of Health Benefits 559,586 559,586 28
Division of Health Service Regulation 1,431,785 1,431,785 29
Division of Mental Health, Developmental Disabilities 23,663,030 23,663,030 30
and Substance Use Services and Division of 31
State Operated Healthcare Facilities 32
Division of Public Health 2,028,867 2,028,867 33
Division of Services for the Blind and Division of 191,286 191,286 34
Services for the Deaf and Hard of Hearing 35
Division of Social Services 1,042,333 1,042,333 36
37
(2) Adjust the amount of the budgeted reduction for vacant position eliminations 38
specified in the schedule set forth in subdivision (1) of this subsection for one 39
or more divisions as long as the adjustment allows the Department of Health 40
and Human Services to achieve the net General Fund savings required by 41
subsection (a) of this section. 42
SECTION 1.5.(c) The Department of Health and Human Services shall report to the 43
Fiscal Research Division by April 1 of each year of the 2025-2027 fiscal biennium on the actions 44
taken in each division to achieve the budgeted reduction for vacant position eliminations for that 45
fiscal year. The report shall include a list of each position eliminated, broken down by division, 46
and for each position the following information: 47
(1) Position number. 48
(2) Title. 49
(3) The amount of salary and fringe benefits associated with the position. 50
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 405-Third Edition
SECTION 1.5.(d) The funds appropriated from the General Fund for each year of 1
the 2025-2027 fiscal biennium to the Department of Health and Human Services are reduced by 2
the sum of thirty -three million nine hundred eighty -six thousand five hundred thirty dollars 3
($33,986,530) in recurring funds. 4
5
WHOLE CHILD HEALTH SECTION REDUCTION 6
SECTION 1.6. The funds appropriated from the General Fund to the Department of 7
Health and Human Services, Division of Child and Family Well -Being, beginning with the 8
2025-2026 fiscal year, for the Whole Child Health Section, are reduced by the sum of one 9
hundred thousand dollars ($100,000) in recurring funds. 10
11
MEDICAL EYE CARE PROGRAM REDUCTION 12
SECTION 1.7. The funds appropriated from the General Fund for each year of the 13
2025-2027 fiscal biennium to the Department of Health and Human Services, Division of 14
Services for the Blind, for the Medical Eye Care Program, are reduced by the sum of one hundred 15
ten thousand dollars ($110,000) in recurring funds. 16
17
ESTABLISH PLAN FOR M EDICAID MANAGED CARE COST-SAVINGS AND 18
EFFICIENCY MEASURES 19
SECTION 1.8.(a) The Departme nt of Health and Human Services (DHHS) is 20
directed to develop a plan for improved health outcomes, program integrity, cost -savings, and 21
efficiency measures in the Medicaid program. In developing this plan, DHHS shall consult with 22
relevant stakeholders. The plan shall include all of the following: 23
(1) Reduction of DHHS administrative expenses. 24
(2) Flexibilities for prepaid health plans, as defined in G.S. 108D-1, to manage 25
service utilization and costs and align claims operations with national 26
standards and best practices. 27
(3) Improved alignment of prepaid health plan contract incentives and prepaid 28
health plan cost containment efforts through full risk -sharing, value -based 29
arrangements, and appropriate oversight of delegated care management 30
entities. 31
(4) Implementation of the plan no later than April 1, 2026. 32
SECTION 1.8.(b) No later than November 11, 2025, DHHS shall submit a report on 33
the plan for cost-savings and efficiency measures, as required in subsection (a) of this section, to 34
the Joint Legislative Oversight Committee on Medicaid and the Fiscal Research Division. DHHS 35
shall provide monthly updates on implementation of the plan and further updates upon request 36
of the Chairs of the Joint Legislative Oversight Committee on Medicaid. 37
38
MEDICAID REDETERMINATIONS 39
SECTION 1.9.(a) The Office of the State Auditor shall examine the Medicaid 40
eligibility redetermination efforts of all county departments of social services in the State, 41
including the number of redeterminations conducted, the number of staff assign ed to 42
redeterminations, and the number of vacancies in the office. 43
SECTION 1.9.(b) The Office of the State Auditor shall conduct a performance audit 44
of a sample of county departments of social services modeled after the audit required by Section 45
11.5 of S.L. 2015-7. 46
SECTION 1.9.(c) No later than April 1, 2026, the Office of the State Auditor shall 47
report the findings of the examination required in subsection (a) of this section and the results of 48
the performance audit required in subsection (b) of this section to the Joint Legislative Oversight 49
Committee on Medicaid and the Fiscal Research Division. 50
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Senate Bill 405-Third Edition Page 5
SECTION 1.9.(d) There is appropriated from the General Fund to the Department 1
of Health and Human Services, Division of Health Benefits (DHB), the sum of one million 2
dollars ($1,000,000) in nonrecurring funds and associated receipts to be transferred to the Office 3
of the State Auditor to be used for the examination and audit required by this section. 4
SECTION 1.9.(e) Subsection (d) of this section is retroactiv ely effective July 1, 5
2025. The remainder of this section is effective when it becomes law. 6
7
PART II. CAPITAL FUNDING REVISIONS 8
9
FUTURE BUILDING RESERVES 10
SECTION 2.1. Notwithstanding any provision of law to the contrary, the funds 11
appropriated for the 2025-2027 fiscal biennium to Future Building Reserves for the building and 12
operating expenses of State agencies are reduced by the sum of forty -two million two hundred 13
six thousand nine hundred nine dollars ($42,206,909) in recurring funds for each year of th e 14
2025-2027 fiscal biennium. 15
16
PART III. MISCELLANEOUS AND EFFECTIVE DATE 17
18
EFFECT OF HEADINGS 19
SECTION 3.1. The headings to the Parts and sections of this act are a convenience 20
to the reader and are for reference only. The headings do not expand, limit, or define the text of 21
this act. 22
23
CONSTRUCTION 24
SECTION 3.2. Except where expressly repealed or amended by this act, any 25
legislation enacted during the 2025 Regular Session expressly appropriating funds to an agency, 26
a department, or an institution covered under this act shall remain in effect. 27
28
STATE BUDGET ACT APPLICABILITY 29
SECTION 3.3. If any provision of this act and G.S. 143C-5-4 are in conflict, the 30
provisions of this act shall prevail. The appropriations and the authorizations to allocate and 31
spend funds which are set out in this act shall remain in effect until the Current Operations 32
Appropriations Act for the applicable fiscal year becomes law, at which time that act shall 33
become effective and shall govern appropriations and expenditures. When the Current 34
Operations Appropriations Act for that fiscal year becomes law, the Director of the Budget shall 35
adjust allotments to give effect to that act from July 1 of the fiscal year. 36
37
SEVERABILITY CLAUSE 38
SECTION 3.4. If any provision of this act or its app lication is held invalid, the 39
invalidity does not affect other provisions or applications of this act that can be given effect 40
without the invalid provisions or application and, to this end, the provisions of this act are 41
severable. 42
43
EFFECTIVE DATE 44
SECTION 3.5. Except as otherwise provided, this act is effective retroactively to 45
July 1, 2025. 46