Resolving medical debt crisis goes beyond Medicaid expansion, certificate of need reform

The fate of a bipartisan health-care consumer-protection bill addressing medical debt could be tied to Medicaid expansion and certificate-of-need legislation during the 2023 session.

The election of a Republican super-majority in the NC Senate and being one seat shy of a Republican super-majority in the NC House for the 2023-24 sessions could be factors in whether House Bill 1039 progresses to a floor vote in either chamber — or addressed at all.

Medicaid expansion backers cite multiple studies that project between 450,000 and 650,000 North Carolinians becoming eligible for Medicaid coverage.

The goal of the certificate-of-need (CON) process is limiting unnecessary duplication of services in a community.

Those promoting CON reform say new competition — foremost from independent and for-profit providers — would push the not-for-profit health-care systems to lower how much they charge for many procedures.

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However, State Treasurer Dale Folwell said both efforts only address symptoms of the overall medical debt issue without providing a potential cure.

Instead, Folwell continues to point to HB1039, filed May 24, titled “Medical Debt De-Weaponization Act.”

The bipartisan bill was filed at Folwell’s bequest, but has stalled in the House Banking Committee after just one information-only hearing.

Folwell said he believes “the prospects are very high” for action on HB1039 during the 2023 session.

Folwell’s primary interest in HB1039 is his oversight authority of the State Health Plan, which has more than 727,000 participants that include current and retired state employees, teachers and legislators. It is North Carolina’s largest purchaser of medical and pharmaceutical services.

According to the bill and a statement from Folwell, the bill’s mission is to “create a pro-family, anti-poverty, consumer protection law that sets parameters around the provision of charity care and limits the ability of large medical facilities to charge unreasonable interest rates and employ unfair tactics in debt collection.”

Tucked into HB1039 is language that could provide free medical care or steep financial discounts to certain lower-income families.

“Everyone knows there’s something wrong,” Folwell said.

The growing awareness of the financial burden presented by medical debt has brought state and national level attention to Folwell’s advocacy.

For example, he was cited significantly in a recent NPR national story on the subject.

Folwell said medical debt affects not only the uninsured and underinsured, but also those with employer-based or federal health exchange insurance whom he says faces unrealistic payment expectations from health-care systems.

“Medical debt will continue to be a problem regardless of Medicaid expansion,” Folwell said. “You can’t have a revenue solution to a cost problem.

“There are individuals who are afraid to get the medical attention they need when they need it because of what could happen to them from a medical billing standpoint.

“The complexities of certificate of need reform and Medicaid expansion really doesn’t have that much to do with the weaponization associated with people’s credit scores and associated with medical debt,” Folwell said.

HB1039 debate

The medical-debt legislation has precedent-setting potential given there’s an intriguing mix of 39 conservative and progressive co-sponsors, including Reps. Pricey Harrison, D-Guilford, and Reps. Lee Zachary and Jeff Zenger, both R-Forsyth.

The June 7 House Banking Committee debate, which lasted about 40 minutes, pulled few punches when it came to accusations of ill will by health-care systems.

Rep. John Szoka, R-Cumberland, questioned Folwell’s assertion that medical-debt weaponization includes hits to consumers’ credit scores if they can’t pay their medical bills in the time that health-care systems deem as timely.

Depending on the health-care system’s debt-collection and bad-debt policies, a patient who is determined to have the ability to pay their bill can have their account sold to a debt collector within a few months of a payment request being made.

Rep. Ed Goodwin, R-Chowan, focused on his concern that indigenous individuals seeking care in hospitals are being steered away from charitable-care options, and toward “a medical credit card” to pay for their medical bills.

Goodwin said he has been told that some hospitals have been pitching the medical credit cards also as options “to pay for gas, groceries or whatever you would like.”

Goodwin said that option inevitably puts hospitals into the debt-collection business, and they eventually hire third-party debt collectors who receive a portion of the paid debt as their incentive.

Szoka questioned the accuracy of Goodwin’s presentation, saying he was not aware of any medical credit card being permitted for use for non-medical purchases.

Folwell said credit scores lowered by debt can result in paying higher interest rates for major purchases.

In most instances, medical debt is not included in determining credit scores if the debt remains with the health-care provider, but is counted if the account is turned over to a debt collector.

HB1039 would set collection standards for healthcare systems, Goodwin said.

“This bill would allow them (indigent-care patients) to be treated more respectfully than they are now,” Goodwin said.

HB1039 support

Since the lone committee hearing, Folwell has continued to speak on his medical-debt concerns, including in a Sept. 7 presentation in Asheville and Oct. 17 presentation in Elizabeth City. He has plans for additional events.

Folwell said that despite the lack of progress in the legislature, the initiative is gaining grassroots and advocacy groups’ support.

“We are grateful that these organizations have finally become alert to the reports that have been coming out of the treasurer’s office for almost a year,” Folwell said.

Folwell called out health-care system executives for not being willing to go to a public forum and address their medical debt and charity care policies.

“Anybody who tries to politicize this by talking about Democrats or Republicans obviously do not know that they are on the wrong side of history,” Folwell said.

HB1039 having such bipartisan sponsorship, and Folwell as an advocate, will keep it on the periphery of the overall health-care reform discussion in North Carolina, said Mitch Kokai, senior policy analyst for conservative think tank John Locke Foundation.

Although Kokai said HB1039 “doesn’t tie directly to the debate over Medicaid expansion and certificate-of-need reform, “it’s likely that policymakers will link major health care legislation together moving forward.”

“If nothing else, concerns about the questionable use of medical debt could play a role as a bargaining chip in ongoing negotiations over other proposed reforms.”

NCHA response

The NC Healthcare Association reiterated it has not taken a position on HB1039.

“An initial high-level take is that federal law already addresses several requirements in the bill, and the NC General Assembly had previously passed legislation in 2013 that addresses many of the state-specific issues related to fair billing and collections practices.”

The NCHA said hospitals’ charity care spending and community benefit investment activity “is transparent and accountable.”

“North Carolina’s nonprofit hospitals annually submit audits to state and federal tax regulators, who determine that hospitals meet their tax status obligations.

“Non-compliance can result in a revocation of a hospital’s tax-exempt status, which has never happened in North Carolina.”

In a comment provided to NC Policy Watch, the NCHA said that “we have significant concerns that this bill would cause hospitals to absorb millions of additional dollars in uncompensated care.”

“That, in turn, could increase the cost of care for others.”

In a separate statement sent to media outlets, the NCHA said that “North Carolina health systems and hospitals have millions of health care interactions with patients and families each year.

“They actively work with patients to help them understand their health care coverage and financial obligations. They try to make it easy for patients to connect to information about financial assistance and repayment options.”

The NCHA said when it comes to an unpaid bill, “the federal Internal Revenue Service has prescribed an extensive series of steps and wait times that hospitals must follow before taking any collection actions, which is a last resort.

“To suggest that hospitals ‘weaponize’ medical debt is nothing but political grandstanding.”

Local legislators’ opinions

Rep. Donny Lambeth, R-Forsyth, and a leading health-care expert in the House chamber, said “it’s too early to tell what legislation may or may not be introduced.”

Lambeth said he has mixed feelings about the medical debt issue.

“Medical debt is a serious problem, not just in North Carolina, but across the country,” Lambeth said.

“But, when we buy a product or a service, we have an obligation to pay for that service. Medical services are no different.

“The system typically works with a person or family to help them manage the cost of health care used,” Lambeth said, “such as helping them get assistance, maybe help qualify for Medicaid, or use an indigenous fund to cover the cost of care .”

Lambeth, a former chief executive of NC Baptist Hospital, has been the main Medicaid expansion proponent in the House, including introducing bills in recent sessions.

“Expansion will certainly help tremendously, as it would add coverage for many persons who have no coverage,” Lambeth said.

“Expansion will go a long way to help medical providers recover their cost to care for persons in need.”

Sen. Joyce Krawiec, R-Forsyth, and a leading proponent of certificate-of-need reform in the Senate, said that “citizens are responsible for all debts they incur, including medical.”

“However, there are many who simply cannot meet those obligations. There are many who currently can’t afford insurance, but could qualify for Medicaid under the expansion.”

Krawiec said a major concern for her is “that there are many errors in medical billing that should be addressed. I am aware of credit complications because of medical billing errors.”

“We must continue to find ways to reduce cost of care and improve access. Certificate-of-need reform is one way to help in this process.”

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