Bill to block Folwell’s medical-pricing plan expected to spark statehouse debate

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By Edward Martin and David Mildenberg

The public may soon get a revealing glimpse of the power of health care lobbying at the state capital, where more than 35 lobbyists are registered to serve hospital and pharmaceutical clients alone, according to the N.C. Professional Lobbyists Association

Starting in 2020, State Treasurer Dale Folwell wants to begin compensating hospitals, physicians and others based on a percentage of what is paid by Medicare, the federal health insurance plan for people 65 and over. He’s responsible for the N.C. State Health Plan, which represents about 720,000 state employees and retirees, making it North Carolina’s largest health care customer.

Folwell’s proposal offers providers 177% of average Medicare rates, which he says both allows profit and saves the plan $300 million in its first year. The plan was unanimously approved by a bipartisan board in October.

But N.C. State Rep. Josh Dobson, a McDowell County Republican, is expected to file a bill this week that would block Folwell from instituting the plan, says Robert Broome, executive director of the State Employees Association of North Carolina, which favors Folwell’s plan. Broome says the bill is emerging amid pressure from health care industry lobbyists.

Calls and emails to Dobson were not returned this week.

“The state health plan board made a very sound financial and public policy decision that will save money for taxpayers and will save money for plan members, while bringing some common sense to how we pay for health care,” Broome says. “It boggles my mind that folks could actually line up and be opposed to this.”

Providers say Medicare typically pays only about 88 cents on the dollar of inpatient hospital costs, and even less for outpatients, and that Folwell’s proposal will force many to curtail services and access. Already, hospitals aren’t adequately compensated for care provided indigents and other essential community services, they say.

“Conservatively, our estimate is that what he proposed would be about a $300 million a year hit to hospitals and health systems,” says Julie Henry, communications vice president of the North Carolina Healthcare Association, which represents the state’s more than 120 hospitals. More than 20 N.C. hospitals operated unprofitably last year, while many others are earning scant margins, says Steve Lawler, the group’s president.

Providers need a major public policy presence because “we’re a highly regulated industry at the state and federal levels,” Henry says. “Our job and responsibility to the people who pay dues to this association is to advocate for their interests.” The association’s 2017 lobbying budget was $553,000, and it has six staff lobbyists plus contract help.

In a statement this week, health care association President Steve Lawler said Folwell “is not being transparent about what this proposal will do to state health plan members and their families. He is busy making promises about premiums, but neglecting to address specifics about the provider network and access issues, and the fact that it does nothing to help individuals and families meet their health care objectives.”

The association is among a half-dozen of the state’s most prominent health care players, which in 2017 paid lobbyists more than $2 million cumulatively. N.C. Board of Elections filings show that the state’s largest insurer, Blue Cross & Blue Shield of North Carolina, had a tab of about $410,000 with its lobbyists including former State Sen. Tom Apodaca, former Raleigh Mayor Tom Fetzer and former House speaker Harold Brubaker.

The N.C. Medical Society had a 2017 lobbying budget of $471,226, while Charlotte’s Atrium Health, formerly Carolinas HealthCare System, spent more than $284,000 on lobbying in 2017.

Folwell says the legislation hobbling his authority over the health plan will “take away transparency and raise health costs.”

The legislature convened this week. “It galls me that those who are supportive of blocking this much-needed reform are doing so in a lame-duck session,” Broome says. He suggests that various parties put off changes and instead study how to pay for indigent health care without hurting hospitals financially during the 2019 legislative session.

Folwell’s plan is attracting national attention because of its far-reaching implications, says Wake Forest University public-health professor Mark Hall. Montana is the first state to try Medicare-anchored pricing. “The difference is they have 33,000 people on their state plan,” a fraction of North Carolina’s, Henry says.

Folwell, a Republican elected in 2016, is making his case for more public disclosure of health care pricing at dozens of civic clubs, local political-party gatherings and other settings. “Lobbying?” he asks. “We’ve got 9 million taxpayers and 720,000 participants in this plan who understand that they aren’t consuming health care, it’s consuming them.”

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