County could save $2 Million in Medicaid
By Gabby Hudson Staff Writer
could save over $2 million in taxes that are paid out yearly for Medicaid.

The North Carolina Senate passed a county Medicaid relief plan. The bill would phase out the county Medicaid share over the next three years.

North Carolina is now the only state requiring county participation in all Medicaid services.

The plan, if passed by the states House, allows the state to assume 25 percent of the counties Medicaid cost beginning October 1, 2007 at a projected state cost of $86.2 million or $500,000 for Cherokee County.

In the plan, county schools will forgo over half or 60 percent of their corporate income tax known as ADM Funds, which is provided by the State. The bill requires the county to replace the schools' funds with the savings acquired from the Medicaid savings.

For the second year, starting July 1, 2008, the state will assume 50 percent of the counties' Medicaid costs saving counties an estimated $271.2 million.

In the second year, the state begins a gradual assumption of a portion of the local option sales taxes, according to the NC Association of County Commissioners (NCACC).

The state would take the per capita one-fourth cent on October 1, 2008 and would assume another one-fourth cent on October, 1, 2009.

According to the plan, in the third year, July 1, 2009, counties will be free from Medicaid costs, saving counties across the state an estimated $600 million.

According to the NCACC, when the process is complete there would be a two cent of local-option sales taxes, with 1.5 cents distributed on a point of collections basis, and 0.5 cents on a per capita basis.

The bill holds all cities and counties harmless and it does not require any counties to raise taxes to make up for any loss of revenue.

According to the NCACC, 15 to 25 percent of the population in Cherokee and Clay Counties are eligible for Medicaid.

Counties in western North Carolina that spend more on Medicaid than school construction, renovations and other capital projects include Clay, Graham and Swain. Graham County spends more on Medicaid than school current expenses.

NC Senator, John Snow said that the bill is one the most significant things that the Senate has done this session. With the Medicaid relief plan now out of the Senate it is up to the House to take up this issue.

"I think the plan is fair, something that will have a positive impact on people's lives, and will give our counties the money they need to address the growth they are experiencing," Snow said.

Snow said part of the discussion about relieving the counties of a Medicaid burden has included a provision which would provide tax relief for low income earners with families through an Earned Income Tax Credit (EITC).

According to Snow, the Federal Tax Code already allows for this type of credit, which reduces or eliminates the taxes that low income working people pay.

The North Carolina proposal would mirror the federal one but at a reduced percentage. Unlike some welfare programs which encourage someone to stay at the house, an EITC encourages work.

Normally the EITC is a credit that goes against the payroll taxes of low income earners. The plan that the Senate passed would help around 440,000.