North Dakota HHS warns Medicaid costs and enrollment shifts will shape next budget

The Department of Health and Human Services presented a high-level budget overview to the House Appropriations Committee Tuesday, telling lawmakers the agency’s large role in state services makes its budget central to near-term fiscal planning.

“For the record, my name is Dirk Wilkie. I’m the interim commissioner of Health and Human Services,” Wilkie said, explaining the agency’s strategic framework and scope of services. He described HHS as “the largest agency in the state and we have the largest budget,” and said that carries both responsibility and opportunity.

Why it matters: Medicaid and related entitlement programs make up the bulk of HHS spending, and changes that occurred during and after the COVID-19 public health emergency have altered both federal funding streams and the state’s cost exposure. That shift will be a major driver of the department’s 2025–27 budget conversation.

The department’s CFO, Donna Auckland, told the panel the HHS base budget shows a general fund increase of $115,000,000 driven largely by cost-to-continue for entitlement programs including Medicaid, child care and foster care. Auckland also described operating cost increases tied to vendor contracts and IT rate changes and said the agency has limited ability to add FTEs in the base budget.

Medicaid changes explained: Sarah Acre, executive director of the Division of Medical Services, detailed federal matching changes and enrollment trends. She said the enhanced federal match applied during the COVID public health emergency ended and that the state’s traditional FMAP is now about 50.97% for the current year.

“During the public health emergency … we actually hit that in May of 2023 and had just over 38,000 eligibles. Today, in December, we had, 22,828 eligibles,” Acre said about the Medicaid expansion population. She added that overall Medicaid enrollment fell from a high of about 137,000 enrollees to roughly 107,000 and that the mix of remaining enrollees is skewed toward people with greater health needs and higher utilization.

Acre and other HHS officials emphasized that the end of the enhanced FMAP does not automatically eliminate state costs because the agency must redetermine eligibility after the federal unwinding. That process removed some enrollees, but Acre said utilization for those remaining on the program has increased because sicker beneficiaries are likelier to remain enrolled.

Operational and staffing context: Wilkie said HHS employs 2,581.83 FTEs and operates from 59 locations across the state. He described the agency’s six strategic priorities, including supporting stable families and advancing high-quality services closer to home, and noted HHS partners with local public health entities, tribal leaders, universities and 19 human service zones to deliver care.

What lawmakers asked: Committee members pressed HHS about whether the state had absorbed portions of the federal funding bump from enhanced FMAP and whether the mix of population changes or per-enrollee costs explain the budget increases. HHS staff said some of the reduction in federal funds is because Medicaid expansion has fewer enrollees now and because utilization has increased among remaining beneficiaries.

Next steps: HHS said it will provide more detailed, division-level line items and grant breakdowns during the section hearings. Auckland said the department had prepared a decision package seeking general-fund IT increases for Governor Armstrong’s consideration and that additional data will follow when the governor’s budget is released on Jan. 15.

Ending: Officials said a detailed breakdown of entitlement spending, grants and FTEs will be presented during the committee’s division hearings; they asked lawmakers to submit targeted questions so the department can provide specific data in those sessions.