Charlotte’s Advocate Health agreed Friday to participate in the state’s medical debt relief plan. That’s a big win for Gov. Roy Cooper and other proponents, who estimate about 2 million residents would see about $4 billion in debt erased if all N.C. hospitals participated. Advocate owns Atrium Health, the state’s biggest hospital system.
Advocate waited until the last day of the state’s deadline for participation in the program. It calls for the state to pay hospitals up to $800 million – and considerably more in the following year – in federal Medicaid money if they agree to forgive medical debt that state officials say they would likely not have collected anyway. The plan also has provisions to prevent low-income residents from accruing future medical debt.
While Advocate agreed to participate in the program, it sent a note to state officials noting that state’s “good intentions” could lead to unintended consequences, such as:
- Health insurance costs spiking for businesses and individuals if the insurance risk pool shrinks with fewer participants paying premiums.
- Businesses could discontinue offering health benefits if their workforce qualifies for care that may be free.
- People could reject insurance coverage since hospitals are now directed to provide free or deeply discounted care, even to those who are commercially insured.
- Health systems in rural communities not be capable of accepting the policy’s requirements and face tougher economic struggles.
The policy also “obscures many of the drivers of the high cost of care,” according to Advocate, citing insurance companies, pharmaceutical companies, pharmacy benefit managers and medical device manufacturers. “Without factoring these other partners into the solution, we are missing the opportunity to address the complete picture of medical debt,” Advocate said in its letter Friday.
Thirty-seven of the state’s 99 hospitals had signed up to participate as of Wednesday. Those included hospitals affiliated with large systems such as Cone Health, UNC Health, ECU Health and Novant Health. Cooper and Kody Kinsley, head of the N.C. Deparment of Health and Human Services, held a press conference promoting the program in Charlotte on Wednesday, an apparent signal to Advocate.
Advocate one of the nation’s largest healthcare systems. Advocate Health posted an operating income of $606.6 million in 2023. The 67-hospital system — which formed after Charlotte-based Atrium Health merged with Milwaukee and Downers Grove, Ill.-based Advocate Aurora Health in December 2022 — posted net income of $2.2 billion last year, according to Becker’s Hospital Review.
The state Department of Health and Human Resources says it will share a list of participating N.C. hospitals next week.
While other governments across the nation are working with health care systems to reduce medical debt, North Carolina’s attempt is unique in that it ties increased Medicaid payments to hospitals who agree to participate in its plan.
Here’s how it works:
- North Carolina was scheduled to pay out $3.2 billion to hospitals next fiscal year through Medicaid’s Healthcare Access and Stabilization Program, or HASP. That reimbursement is meant to help hospitals that experience loss through providing care to Medicaid patients.
- The state will now have up to $4 billion to pay out to hospitals participating in its medical debt relief program.
- For SFY 2024, HASP payments will be approximately 27% higher for hospitals that agree to adopt medical debt mitigation policies specified by NCDHHS compared to those that do not (in other words, hospitals that agree to adopt the policies will receive $1.27 for every $1 in HASP payments received by hospitals that do not adopt the policies).
- For SFY 2025, payments will be 92% higher for hospitals that implement the medical debt mitigation policies (or $1.92 for every dollar of HASP payments received by hospitals that do not adopt the policies). The state will have more than $6 billion available in HASP that year.
Hospitals spend too much money and effort on trying to collect payments from people who cannot afford to pay, says Cooper. “The old, ‘You can’t get blood out of a turnip’ analogy is at work,” Cooper said Wednesday of hospitals. “They’ll earn more by forgiving medical debt than they would by otherwise not going in this direction.”
North Carolina expanded Medicaid coverage for low-income residents in December last year, and since that time about 523,000 people have been added to the program.
State Treasurer Dale Folwell has criticized the state’s medical debt relief program as too generous to hospitals. He says his department’s studies show N.C. hospitals already receive excessive charitable-care benefits that don’t lead to reduced prices. He believes the hospitals should be writing off much more debt, taking vigorous action to reduce prices and show more transparency in their charges.
In 2020, hospitals reaped more than $1.8 billion in tax breaks, yet charity care spending did not surpass 60% of the tax exemption’s estimated value across the majority of the state’s largest systems, according to a 2021 report published by the North Carolina State Health Plan and Johns Hopkins Bloomberg School of Public Health.
Cooper said Wednesday that gap has always existed “between what’s available and what’s taken advantage of.” The state’s plan would require hospitals to do more to automatically enroll low-income patients in their existing charitable care programs, which would lessen future medical debt.
The North Carolina Healthcare Association estimates North Carolina hospitals and health care systems provided $6.3 billion in community benefits last year, including about $1.2 billion in charity care. This free care is one reason hospitals are exempt from paying property taxes.