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- Well, it feels like the general tenor and tone of our economy and overall there is an uncertainty that still is very alive and well.

The pace of business has been very dominant in many discussions.

I guess the question is are we more anxious now than we even were last year?

I'm Chris William and welcome again to the most widely watched program on Carolina business policy and public affairs and are these issues gaining momentum or is the worst over?

Of course, as always, we unpack some of these important things that face us right here in this region.

And later on, he is the Secretary of North Carolina's Department of Health and Human Services.

Kody Kinsley joins us and we start right now.

- [Announcer] Major funding also by Blue Cross/Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association and Martin Marietta, a leading provider of natural resource based building materials, providing the foundation on which our communities improve and grow.

On this edition of Carolina Business Review, Vicki Lee Parker-High, from the NC Business Council.

Dr. Joseph Von Nessen, from the Moore School of Business, University of South Carolina and special guest, Kody Kinsley, Secretary of the North Carolina Department of Health and Human Services.

(dramatic music) - Hello, and welcome again to our program.

Vicki Lee, Joey, good to see you both.

Thank you for joining us.

- Thank you, Chris, good to see you.

- This is always fun and you guys make it so.

Vicki Lee, let's start with some real big wins.

In North Carolina, we had over $17 billion.

In South Carolina, we had over $10 billion in capital investment and new announcements in economic development.

I mean, this is a high water mark for the whole region.

How does small business play into that?

What's the barrier for them to be engaged and could they be the solution for the job shortage that we all talk about?

- Absolutely, and it's also been record number of new business creation, as well.

We've consistently- - Again, for another year?

- Yes, yes, we've been doing really well.

I think 2022 is either right on par with that previous growth or it could possibly exceed it, but it's been record numbers for the last few years.

So, clearly, there's a whole lot benefit for the small business in that realm, but there are also some challenges, as well, because it's still a tight job market.

There's still, you know, economists are still calling for a huge number of net new jobs and employers and we should be growing to about 5 million employees in 2023.

So, you know, while there's a lot of opportunity, there's also that challenge of making certain that they are ready to attract those skilled workers that they need and so some of the business are gonna have to make some adjustments to make certain that they can pull those workers in.

- Can the small business, you know, when you hear these Google and Apple and all of these big announcements for these big jobs, can small business step into those jobs?

Is that a good place for- - Well, certainly, I mean, there's the trickle out from that- - Well, sure.

- Because you're bringing in, you know, all these, you know, workers so that's, you know, creating more growth opportunity for the small businesses that have to, you know provide food and provide clothing and provide, you know, services to all of these workers that we're attracting.

So, it is a real fallout for the small businesses and so, again, that's where the opportunity is, it's where the fertile ground is that you need the ecosystem of the small businesses to make certain that those Apples and the Google- - Right.

- Those employees have what they need and same with housing and some other markets that are benefiting from that growth.

- Joey, on this economic announcement in the whole region, are jobs gonna continue to be the choking point for these, you know, the announcement, the win, everybody celebrates, but now we have to get the practice of boots on the ground, so to speak.

Is that the choking point?

- Definitely.

There's no question that's going to be the fundamental challenge of the Carolinas and of South Carolina in particular over the next decade.

This labor shortage that is ongoing, largely it's because it's due to the retirement of the baby boomers, the people over 55 and so it's permanent and so we're facing a smaller, a smaller labor force and so businesses are gonna have to adjust to that.

The good news is the Carolinas and South Carolina in particular, relatively speaking, are very competitive, meaning that we're doing a lot of- - You mean with each other or national or?

- Well, relative to the national average, so if you look at South Carolina and such a strong technical college programs that we have, Ready SC, Apprenticeship Carolina, we can talk about a lot of specific examples, but South Carolina does a very good job of meeting the demands of employers and training workers in South Carolina, so that puts us in a strong position, even though if we look broadly across the US, the labor shortage is going to be with us and something that we have to continue to address.

- Yeah, Vicki Lee, you know, Joey talks about the technical college- - Yes.

- In North Carolina, they're called community colleges.

Do you get the sense there will be a permanent head of the North Carolina Community College named and will that go a long way to help the, I don't wanna say re-engagement, but maybe more solidifying, the role the community colleges have played in what you talked about?

- I don't know about the naming of the new head, but I can say the role is definitely expanding.

That has been going on now for the last few years where, you know, where we see our community colleges are more flexible to meet the needs to help address some of the skill, the lacking skills that our employers need opposed to some of the bigger schools.

So they're able to kind of turn on the dime to make adjustments and their curriculum and help produce those skilled workers that our employers need.

So that has been ongoing.

We see that having that direct relationship with small businesses, even the business members in my own group and the North Carolina Business Council, you know, are working directly with community colleges to help set like, you know, curriculum over the summer to teach them about what skills are needed for specific jobs.

- Joey, to shift gears a little bit, is there a big gap between what people are worried about when it comes to recession and actually what the numbers are bearing out?

- Well, I think the biggest concern is just a general pull back in demand overall if we're talking from an employer standpoint and a business standpoint.

They're looking at sales projections, they're concerned about being able to meet sales goals in the new year and they're in a sense just spooked right now because they, we're still seeing consumer demand that is fairly strong.

We had a fairly weak report for retail sales in December, but in general consumer spending has been fairly stable throughout 2022, but at the same time, because we've seen all these interest rate hikes and those effects are not all baked into the economy yet, it takes 12 to 15 months for any given rate hike to be fully realized in the economy.

And so that means that even though most of the rate hikes are likely behind us, the effects are not necessarily here yet and so employers are cognizant of the fact that they may see a pullback in demand and so that's why we've seen a reduction in hiring.

They're just not quite as aggressive as they have been because they are, they are a bit concerned at this point.

- So, last question for both of you, and, Joey, I want to stay with you on this, would you keep, if you see another downturn, another slowdown in retail sales or spending, is that alarming or is that just part of the cycle, in your opinion?

- I think that it's, I think it's part of the cycle, but I think the the probability of a recession is greater than 50% at this point, sometime in 2023 that we will see that.

The adjustment is happening already, particularly in the housing market that we're all familiar with.

Decline in sales of about 18%, but still we're above levels where we were in 2019, so a lot of this is adjustment, but some continued pullback could put us into a mild recession this year.

- Yeah, so as you say mild recession, I promise this is the last one, because I said the last one was the last one, but as you say mild recession, do you think there's more of a fear of recession than there is actual when the recession is here and maybe it is here, maybe it's a role in recession?

- Yes, I think, just as last year, we had two negative quarters of GDP growth, but we nevertheless had strong consumer spending and no real declines in employment.

The unemployment rate stayed fairly flat.

I think we can see a mild recession where the effects overall are fairly minimal and a minimal uptick in unemployment.

It's 3.5% now at the national level.

I think we could see a recession where unemployment doesn't go above about 4 to 4-1/2%.

So that's good news as we look forward.

- Yeah, okay.

Vicki Lee, we're gonna give you a pass on asking you about interest rates in the economy, so you get a pass, thank you.

We're gonna be joined by our guest here in a second.

Before we do that, though, coming up on this program in the next couple of weeks, at least, maybe two to three weeks, a returning guest is the Chief Executive Officer of Colonial Life headquarter in Columbia, Tim Arnold will be our guest again.

And then also, not far behind him, joining us again on this program, she is, you could call her the education czar of North Carolina, Catherine Truitt is the Superintendent of Education in the old north state.

She will be our guest again.

But right now, our guest's predecessor, you may recall this name, Dr. Mandy Cohen, turned out to be a pretty good wartime general so to speak.

She was in the top healthcare job in the old north state when COVID unfolded and took root, but now what?

What are those issues that have re-emerged as crucial for the tar heel state's top healthcare boss?

Joining us now, he the top healthcare boss, North Carolina's Secretary of DHHAS, Kody Kinsley.

Mr. Secretary, welcome to the program.

- It's great to be here, thanks.

- I know you worked very closely with Dr. Cohen, all along the implementation of whatever the policy around COVID was initially and became and one more question, Mr. Secretary, about COVID and I promise we're not gonna let it dominate because I'm sure you're ready to get past some of it, but the idea that four years now we've been living with COVID and it's become part of our DNA.

What's changed for you when it comes to just the deployment of the assets of DHHS, how you think, how you think about policy, what's forever changed?

- You know, I think we have to think back to the start of COVID and what was particularly novel about COVID was that it was novel.

We didn't have tools, resources, we didn't know what to do with it.

And there was a time when remember, we were washing bananas.

People weren't sure how to manage through it.

And, you know, we've had this time to learn how to manage it and as we came into the beginning of 2022, that was the vision that we really tried to put out for North Carolina was we had the tools to manage COVID so it doesn't manage us.

Now, one of the things that we learned along the way was that really good data and transparency around that data allows us to understand the health of North Carolina and try to organize our response.

We've tried to take those lessons learned during COVID and apply them to our top priorities now, which are reinvesting in our work force that has been hit hard through COVID, taking care of kids and their family members so they can be well for the next generation and I think job number one, investing in behavioral health.

We have all felt these last four years as if they have been 40 and I think there's a great chance for us to be better by taking care of our mental health.

- [Chris] Vicki Lee?

- Yeah, you mentioned, you know, taking care of our workforce and making it, I believe one of your goals is to make it strong and inclusive and so I wanted to hear a little bit of how the department is planning to do that, like some of these steps you all are planning to take to create a more healthy and strong workforce.

- Absolutely, let's start with thinking about the childcare workforce.

Again, during COVID, one of the things that we learned when we made the really hard decision around education and in-person learning in the beginning when we were learning about COVID, we had to also support childcare facilities to stay open so that people could go to work.

Those essential workers couldn't be there.

We see that now today still.

We were able to put $850 million into childcare over the last several years because of federal funds, but that money is gonna run out.

And if childcare ends, then our small businesses and other business will feel the brunt of their folks not being able to be there.

So, focusing on shoring up childcare is another to priority for us as part of that strong inclusive workforce effort.

- Joey?

- So, following up on that, looking at the labor force participation rate, which we know is at lows and has been falling over the last decade and that's especially been true among the prime working age population, 25 to 54, so we we're looking to get that up, obviously these are challenges associated with drug addiction and childcare and transportation access, so do you have specific initiatives that you're working on that are directed towards that population that we really need to grow in terms of labor force participation going forward, given its fundamental challenge, given that it is a fundamental challenge to the Carolinas over the next decade?

- You mentioned drug addiction.

I mean, unfortunately, you know we didn't spend any less money of investing in recovery resources, especially around opioids.

In fact, we increased resources over the last several years.

Yet, at the same time, we've seen a 40% increase in the amount of overdoses from overdoses showing up in emergency departments.

What we know about addiction is it's just as much about treatment as it is about all the supports that help people stay in recovery.

During COVID, people lost their social supports and they lost access to their job sometimes, which made them lose access to their recovery, so we're really invested in giving people the tools to stay in recovery, such as getting reconnected to employment, so, you know, I'm really excited about the opioid settlement money that is coming down from the various things that the Attorney General has been leading.

You know, that money can help support communities, to help rebuild connections to employment and employment supports, but in the end, the biggest thing we're gonna have to do across employment is we have got to expand Medicaid.

I mean, Medicaid is the sustaining factor that can help support, you know, workers in childcare to stay in their jobs, people that are in need of addiction treatment to stay in recovery and, guess what, when those people can do their jobs, they can, you know, support the economy overall.

I mean, it's a smart investment.

- You know, Dr. Mandy Cohen, as you well note, Mr. Secretary, came to North Carolina with the idea that opioids certainly, but Medicaid and expansion was very much doable and then COVID came along.

How confident are you now in this year of 2023 that you can help, that the agency can help get that over the finish line and actually get Medicaid dollars as part of the annual budget?

- You know, last year I was saying that the only thing I wanted for Christmas was Medicaid expansion.

You know, we were, as we came into December, we were closer than ever.

You know, I am so grateful for the leadership in the general assembly.

We hear loud from both the Senate and the House that Medicaid expansion is the right thing to do.

The financing just makes sense.

It's $8 billion of federal resources into North Carolina to help support that.

I think that we are closer than ever and I am committed to working closely with the general assembly to help them have whatever they need for us to work through and get this done.

It's the right investment for North Carolina.

It's long overdue.

- Is that $8 billion a game changer for you?

- It's absolutely a game changer.

In addition to the $8 billion that would just sustain people's access to care, would shore up our safety net of our hospitals.

It was also an additional $1.5 billion signing bonus as I think of.

You know, our vision for that is mental health and workforce.

I mean, imagine where we would have been in COVID if we had 1.2 million people in North Carolina already with access to healthcare.

We've got some ground to make up.

If I can take that 1.5 billion and support access to recovery programs, mental health services, placements for children that are languishing, today, there is likely 250 people sitting in an emergency department in North Carolina with a mental health concern that have nowhere to go.

- In any one ED.

- Across the state.

- Okay.

- 250 people and, you know, that's not okay.

We can do better by those folks, but we gotta build resources.

I mean, if we haven't, you know, a lot of those folks are uninsured.

If we can cover them and support building out businesses around healthcare, we can help support them better.

- Yeah, Kody, one of the other things I noticed that you were focusing on in terms of mental health is providing the mental health funding for defendants.

And I thought that was, you know, a smart move, but I am curious what, you know, what led you or led the department to also support in that way?

- You know, my background is really in operations and I worked for some time at the US Treasury and I care a lot about smart investments.

And when we thing about justice involved populations and mental health, there is not a smarter investment.

70% of people in an incarcerated setting will have a mental health or substance use disorder issue.

If 70% of people in jails had diabetes, we'd be like what's on the menu?

You know, we have to do something about it.

You know, there's an opportunity here to divert folks on the front end before they even go in that door and we've, in working on opioids over the last several years, something I heard loud and clear from our law enforcement partners was we can't arrest ourselves out of this.

If we can support people with access to treatment, that is a good investment of money that will save us dollars in the growing incarcerated population.

It's also the right thing to do by people most importantly, giving them a chance and guess what?

When they get supported, access to recovery and they can get a job and they can pay taxes and reinvest into the economy, it's a win, win, win.

- Exactly.

- Yeah, Joey.

- [Chris] Have you seen any challenges with the benefits clips so the idea that when people are on social services and they're trying to transition to employment, sometimes those services can be cut off abruptly, which can either disinsentivize them from going back to work or making it harder.

Is there a way that you all are working on or a role for you to play in that transition process to make sure that it goes smoothly?

- I mean, this is another reason why Medicaid expansion makes a lot of sense for business, which is, you know, people right now, you know, if you're at a below 100% of poverty and you're on Medicaid, for you to be able to make enough to actually buy a plan through the marketplace, it's unaffordable and so people are not incentivized to move.

We have that cliff and that donut hole now.

Medicaid expansion fills that hole.

It gives people a better ramp up so that they can earn enough to then step into either an employer that can provide that plan or whatever.

It also, you know, when we, we're paying for it anyways.

Right, we're paying for in uncompensated care in our emergency rooms.

By bringing Medicaid expansion into North Carolina, we can help control the cost and we see this in states across the nation for private employers that pay for health insurance plans, which is growing driver.

- You know, having a great policy and a bunch of public agreement on the policy is one thing, but are there still holdouts, and I'm not asking you to name names, but are there still holdouts with people that are uncomfortable about saying we have mental health issues, we want to bring them out of the closet so to speak or we want to even shine a light on the fact that there are, as you so eloquently said, behavioral issues, behavioral health issues.

Are there still folks, and I mean legislatures that are unwilling to support whatever increased monies it would take?

- You know, I think that there are always going to be people who kind of, on certain principles, stand against public benefits or something like that.

I think the good news is that the majority of legislators that I speak with and work closely with understand that the dollar just make sense.

I mean, to leave $8 billion on the table in DC and not bring what state taxpayers have already been paying to DC and their federal taxes back to North Carolina to reinvest in North Carolina is foolish.

You know, I think about the North Carolina General Assembly as the board of directors and if I went to any board of directors and said I have a deal for you.

I'll let you get $8 billion at zero cost to the state taxpayer and they said no, I think they'd be violating their fiduciary responsibilities.

I think there's a great opportunity here to do the right thing.

- Spoken like a good CFO by the way.

We have about two minutes left.

Vicki, do you have a question?

- Well, I'm feeling very confident that this might actually get over the goal line.

So, you make, it is true, a compelling argument, so I was curious, too, were there, did you anticipate, though, the pushback because that has been the argument.

We've know the funding that's been on the table and that we had access to and I really do, I'm excited about your optimism, but I guess the question's still, you know, are we concerned about the pushback that's potentially still there?

- Well, I think that it's gonna take all of us to get over the final hurdle.

You know, the hospitals were on the front lines during COVID.

Because of the workforce implications we're seeing, many of them have struggled financially.

The safety net is stretched to the point, you know, go visit your local ED.

You know, if you've had any experience in the amount of time it takes you to get access for emergent care right now, it's in a really bad situation.

They need those financial resources that Medicaid expansion will bring into the state.

I think our hospitals have an opportunity to lead here in really making sure that their members in the general assembly understand how their local hospital could be impacted by this financial situation and how we can make a difference.

I think it's gonna take us pushing there to really get us through to the end.

- There's been a recent announcement that the state healthcare plan in North Carolina is going to make a change in vendor to Aetna, is it Aetna.

I need to think about this for a second.

But from Blue Cross/Blue Shield.

What role do you have to play in that?

I know that falls under the Dale Falwell, treasurer of North Carolina, I don't know why I'm having a brain cramp about this, but as DHSS, is there a role that you have or the agency has in that transition?

- We don't have a direct role in this.

I mean, close partnership with Treasurer Falwell and appreciate his work on a number of fronts.

You know, I think that Treasurer Falwell is motivated by something that we are all motivated by, which is that we desperately need to control healthcare costs.

You know, this country, this state pays, you know, alarmingly more for healthcare with significantly less outcomes than any other country or state, you know, or any other country.

You know, and that's been our whole motivation at the department for the last several years.

How do we spend our money wiser to buy outcomes and health and not just buy more stuff.

And I think there are different ways to do that.

Our firm belief is that, you know, you can't control costs until everybody has a cost center to attract towards.

Right now as long as we have 1.2 million people with uncompensated care, they're driving up costs for everybody else, we're not gonna get there.

We think Medicaid expansion is a foundational element to control cost and to bring people into the platform that the general assembly intelligently crafted around managed care.

And we have done a great job of implementing that and we'll continue to work to try to drive down costs.

I'm more interested in paying for food and mental health services and access to employment and all the things that we know that drive health over the lifespan to try to lower costs for North Carolina in the long haul.

- Secretary Kinsley, thank you being a guest.

I think everyone in North Carolina's probably fortunate and glad to have you back in the state from DC along time ago, but still.

Please come back.

- Especially my mom.

- Even better said, thank you.

Joey, good to see you.

- Good to see you, Chris.

- Thanks for coming out from Columbia.

- Thank you.

- Vicki Lee, thanks for making the haul in from the triangle.

- Absolutely.

- Okay, good to see you all.

- Absolutely.

- Until next week, I'm Chris William.

I certainly hope all your business is good.

If you like to watch past programs, carolinabusinessreview.org.

Have a good weekend and goodnight.

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