North Carolina’s Dual Crisis: Child Care and Medicaid Funding on a Collision Course
North Carolina lawmakers are grappling with a complex web of challenges as the 2026 legislative session approaches. Escalating Medicaid costs, particularly for autism therapies, are colliding with a severe child care shortage, creating a precarious situation for families, businesses, and the state’s economy.
The Child Care Crunch: A $5.65 Billion Problem
More than one in four modern parents in North Carolina have been forced to leave their jobs due to a lack of affordable and available child care. This isn’t just a personal hardship; it’s a significant economic drain. Insufficient child care coverage is costing the state an estimated $5.65 billion annually in lost economic activity, with $4.29 billion attributed to employee turnover and absenteeism. Businesses are feeling the impact, struggling to recruit and retain talent.
The problem extends beyond availability. The cost of child care is a major barrier, averaging over $11,000 per year per child. Child care workers themselves face low wages – around $14.20 an hour – contributing to staffing shortages and exacerbating the issue. This creates a difficult cycle: raising wages requires raising rates for parents, potentially forcing more to leave the workforce.
Candace Witherspoon, who leads early childhood programming for the state Department of Health and Human Services, emphasized the importance of affordable, quality child care for supporting working families and developing the future workforce.
Medicaid Under Pressure: Autism Therapy Costs Soar
Simultaneously, North Carolina’s Medicaid program is facing a financial strain, driven largely by a dramatic increase in spending on autism therapies. Costs have surged from $121 million in 2022 to $544 million last year, with projections reaching $1.1 billion by 2027. This rapid growth has raised concerns among lawmakers about potential fraud and the efficient use of funds.
Senator Benton Sawrey highlighted a 127% increase in referrals to the special investigative unit at the Department of Health and Human Services related to Medicaid payments for autism therapy. Questions have also been raised about the length and necessity of telehealth sessions, with some questioning whether services are actually being provided as billed.
A Budget Impasse and Political Friction
Governor Josh Stein has repeatedly urged lawmakers to fully fund Medicaid, warning that a shortfall could jeopardize health coverage for the 3 million North Carolinians who rely on the program. However, reaching a funding agreement has proven difficult, particularly in the absence of a new state budget passed last year.
Republican lawmakers acknowledge the need for Medicaid funding but have also expressed concerns about the Stein administration’s efforts to control costs and prevent fraud. A special session called by the governor late last year to address Medicaid funding was ignored by Republican legislators.
The state is attempting to find savings within the Medicaid system, identifying $48 million in potential savings through billing reviews. However, the program also faces a $124 million cut from federal funding, adding to the financial pressure.
Looking Ahead: Potential Solutions and Challenges
Lawmakers have discussed potential solutions to the child care shortage, including building facilities at state universities and expanding subsidies for low-income families. However, action has been limited. Currently, the state only covers 18% of children who qualify for subsidies, leaving over 15,000 children on a waitlist.
Addressing the Medicaid crisis will require a collaborative effort and a willingness to address concerns about both funding and program efficiency. The state faces a delicate balancing act: ensuring access to essential health care services while safeguarding taxpayer dollars.
Frequently Asked Questions
- How much is North Carolina losing due to child care issues? North Carolina’s economy is losing an estimated $5.65 billion annually due to insufficient child care coverage.
- What is driving up Medicaid costs? A significant increase in spending on autism therapies is the primary driver of rising Medicaid costs.
- How many North Carolinians rely on Medicaid? Approximately 3 million North Carolinians are currently enrolled in Medicaid.
- What is the average cost of child care in North Carolina? The average annual cost of child care in North Carolina is over $11,000 per child.
Pro Tip: Explore resources offered by NC Child (https://ncchild.org/) for information on child care advocacy and support.
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