By Michelle Crouch
Co-published with The Charlotte Ledger
Every eligible hospital in North Carolina has opted in to Gov. Roy Cooper’s medical debt relief initiative, which promises extra payments to hospitals that agree to forgive old medical debt and beef up their charity care policies, state officials said Monday.
The program calls for hospitals to wipe out about $4 billion in medical debt for nearly 2 million low- and middle-income patients across the state, according to the N.C. Department of Health and Human Services.
“This will make a tremendous difference in the lives of North Carolinians,” said Cooper, a Democrat. “Unlike most other debt, medical debt is not a choice. People don’t choose to have accidents and get cancer and suffer a heart attack.”
The program requires hospitals to forgive medical debt for current Medicaid patients dating back to 2014, and to forgive old debt that’s been deemed uncollectible for other low- and middle-income patients.
Hospitals must also provide charity care and specific discounts to low-income patients based on their incomes, take proactive steps to make sure eligible patients get those discounts and refrain from reporting medical debt to credit agencies.
“This is a major deal. Not only was it approved, but I’m so glad it has a 10-year back date,” said Deborah Maxwell, president of the North Carolina NAACP, who had signed a letter to hospital CEOs urging them to participate.
“Ten years ago is when we should have initially approved Medicaid expansion in this state,” she said. “This will help those individuals who were unable to access Medicaid and had to decide each time they were in pain: ‘Should I go to the hospital or wait it out because I don’t have insurance?’”
The program is leveraging new federal dollars coming to North Carolina because the state shifted to Medicaid managed care under a program called the Healthcare Access and Stabilization Program. The initiative was originally expected to add about $3.2 billion annually to hospital coffers, but it will now grow to $4 billion this year and $6.5 billion in fiscal year 2025.
“We’ve taken a major step to try to make sure that [hospitals] have to perform in order to get this additional money,” Cooper said. “That’s what this program is all about. This is money that would have gone to them anyway, without conditions, to help them deal with issues that they faced during the pandemic and other expenses.”
Concerns about the program
Although every hospital opted into the program, some expressed reservations. The largest health care system in the state, Charlotte-based Atrium Health, outlined several concerns in a letter it sent to the North Carolina Department of Health and Human Services last week.
In the unsigned letter, Atrium said the program could hurt struggling rural hospitals and discourage people and businesses from buying health insurance, potentially pushing up premiums.
Atrium also said other players that help drive up the cost of care, such as health insurance companies with high deductibles, should have been factored into the state’s policy.
North Carolina Senate leader Phil Berger, a Republican from Eden, also criticized the program. In an email statement to NC Health News, he described the program as rushed and political and said launching it outside of the legislative process created “a laundry list of unknowns.”
“With the governor’s program, we don’t know the tax implications, the enforcement methods, or more importantly how a rural hospital that survives on a month-to-month basis is going to meet some of these immediate requirements,” the statement said.
His office also questioned the benefits of medical debt forgiveness, citing a New York Times report that said researchers found few meaningful benefits from medical debt relief.
Created with input from hospitals
Cooper emphasized that the state crafted the program with hospital input.
“Even before we put this plan in place, we asked for input from the hospitals, and, in fact, many hospitals, including a number of rural hospitals, gave us suggestions,” Cooper said.
He added that he believes the final iteration of the program offers benefits to hospitals, and that’s why they signed on.
Hospitals would have been able to collect only a small percent of old debt anyway, he said. And patients whose medical debt has been relieved will be more willing to seek preventative care because they won’t worry about the cost, he said, meaning patients won’t be as sick when they get to the hospital.
Rep. Donny Lambeth, a Winston-Salem Republican and former hospital administrator, said he worked with Kinsley on the proposal during the legislative session and that he supports the program.
“I believe it is another way to improve health care in North Carolina for our citizens,” he wrote in a text message. “It allows N.C. hospitals to give a little but to net benefit. … I am so pleased this will benefit so many who have struggled to pay all their hospital debt.”
11 conditions hospitals have to meet
The hospitals now have a series of conditions to meet to get their boosted payments, DHHS officials said. Here are some of the requirements of the program and the effective date of each:
Debt forgiveness for Medicaid enrollees: Hospitals must forgive all unpaid patient medical debt dating back to 2014 for patients currently enrolled in Medicaid. That includes debts subject to a patient payment plan. Effective date: July 1, 2025
Debt forgiveness for low-income patients: Hospitals must forgive medical debt deemed uncollectible dating back to 2014 for patients with incomes at or below 350 percent of the federal poverty level ($52,710 for an individual or $109,200 for a family of four), as well as for patients for whom the debt exceeds 5 percent of their annual income. Effective date: By March 1, 2025, hospitals must enter into an agreement with Undue Medical Debt (formerly RIP Medical Debt) or another vendor to meet the requirement. The debt relief itself will take longer.
Automatic charity care for certain patients: Hospitals must automatically qualify patients for charity care if they are homeless, mentally incapacitated with no one to act on their behalf, or enrolled in a public benefit program such as Medicaid, Supplemental Nutrition Assistance Program or the Special Supplemental Nutrition Program for Women, Infants and Children. Effective date: Jan. 1, 2025
Free care and discounts to low-income patients: Hospitals must adopt a financial assistance policy that offers free care to patients with incomes at or below 200 percent of the federal poverty level ($30,120 for an individual or $62,400 for a family of four), as well as discounts of 50 percent to 75 percent for patients with incomes up to 300 percent of the federal poverty level (45,945 for an individual or $93,600 for a family of four). Effective date: Jan. 1, 2025.
Presumptive eligibility for financial assistance: Hospitals will develop a process to screen patients for charity care without requiring patients to apply for assistance. Effective date: Jan. 1, 2026
Limits to payment plans: Payment plans for individuals with incomes up to 300 percent of the federal poverty level may not exceed a duration of 36 months with monthly payments no greater than 5 percent of monthly household income. A payment plan can run for longer than 36 months if the total amount collected doesn’t exceed what would have been collected under a 36-month/5-percent interest plan. Effective date: Jan. 1, 2025.
Medical debt interest rate: The interest rate on all medical debt held directly by the hospital shall be capped at 3 percent. Effective date: July 1, 2025
Limits to debt collection processes: Hospitals must wait 120 days after the first bill has been sent to sell debt to third-parties, and it cannot take the following actions to collect medical debt: arrest, civil contempt/imprisonment, foreclosure, garnishing wages or state income tax refunds. Effective date: July 1, 2025
Reporting to credit agencies: Hospitals will not report a patient’s medical debt to a credit reporting agency. Effective date: July 1, 2025
Liability for medical debt: No individual except for spouses will be held liable for medical debt owned by the hospital or sold to third parties of any person age 18 and older. Effective date: July 1, 2025
Insurance appeals: Medical creditors/debt collectors will not initiate legal action against a patient or refer debts to an external debt collection agency if an insurance appeal or review is pending within the previous 60 days. Effective date: July 1, 2025
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