North Carolina is finally confronting the ‘horror stories’ of its medical debt crisis 

The state has among the worst rates of medical debt in the country, but a new program by Roy Cooper could bring relief to millions of low- and middle-income North Carolinians.

Imagine a health care system that allows hospitals to sue patients who received life-saving treatment, but couldn’t afford the care. Imagine a system that lets hospital companies threaten to take the house of a widow whose husband could not be saved. Imagine a system where many cancer patients can’t afford to survive.

Now imagine these aren’t figments of imagination. 

These are the realities of the United States’ medical debt crisis, an intractable problem that robs survivors of a financial future, makes the sick sicker, and preys on the most vulnerable North Carolinians while they are at their most vulnerable. 

Nationwide, medical debt totals more than $220 billion, the Kaiser Health Network reported last year. The issue is even worse in North Carolina, which has some of the highest medical debt rates in the country. 

According to a 2022 analysis by the nonprofit research group the Urban Institute (UI), more than 20% of North Carolinians were in some stage of medical debt collections. (In UI’s 2024 data update, the rate fell to 8%, but the group attributed that to a change in how national credit report agencies record medical debt, and did not mean there had been a significant drop in the number of people facing debt.) 

Other estimates, from Kaiser Family Foundation polling and credit bureau data, suggest as many as 3 million adults in the state likely carry medical debt.

Whatever the precise number, the financial and physical toll of this burden can be staggering, creating obstacles many patients can never overcome. 

But state and federal officials are finally trying to do something about it. 

The ‘horror stories’

These aren’t just stories of data and dollar signs. They are stories of heartbreak, pain and loss. 

• A 2023 study by the state treasurer’s office, in partnership with Duke University, reached out to 300 patients in North Carolina with unpaid medical bills.They included a cancer survivor who “can never afford to move because the hospital has a lien on her condo” and a 70-year-old who can’t afford to retire after her husband’s heart attack “because the hospital has a $192,385 lien against her house.”
• Dr. Howard Mell, an emergency room physician, told Cardinal & Pine recently of a patient in rural west North Carolina who tried multiple times to take their own life because of medical debt.

The patient intentionally crashed their car at high speeds. But they didn’t die.They were taken to a small rural hospital with injuries that were too serious to be treated there, so an air ambulance company transported the patient by helicopter to a trauma center far away, piling up thousands of more dollars in debt for the patient.

These, the NC Treasury study said, are the “horror stories” of medical debt.

North Carolina hospitals sued more than 7,500 patients over unpaid bills from 2017 to June of 2022, the treasury report commissioned by North Carolina Treasurer Dale Folwell found. And just a single healthcare system, AdvocateHealth, placed liens on the houses of more than 11,000 North Carolinians.

Dr. Mell, who no longer works in North Carolina, in part, because of his concerns about the medical debt crisis, said that he’d had patients refuse urgent care because of the expense. 

“It’s hard to say that I ever went two shifts without having somebody answer that they’re not going to fill the prescription, they’re not going to follow up, they’re not going to accept the admission because they’re worried about how to pay for it,” Mell said.

The problem

There are several reasons medical debt has become such a problem in North Carolina, each feeding the other. 

• Many rural hospitals don’t have ambulances, so privately-owned air-transport companies are used to take patients to larger facilities. That can cost tens of thousands of dollars.
• Hospital groups often issue errant bills that patients don’t know they can contest, or add surprise fees patients had no way of expecting.
• Large medical companies are increasingly buying private practices and smaller pharmacies, a form of medical franchising that taps the companies into new revenue streams but limits choices for patients and increases costs.
• Hospital groups often partner with credit card companies to put patients on seemingly helpful payment plans  which can actually charge exorbitant interest rates.
• Insurance companies have a financial incentive to deny claims, Dr. Mell said, because they are beholden to their shareholders, not the patient.
  
• Medical debt can affect patients across income levels, but it has an acute effect on lower income North Carolinians, and a disproportionate effect in communities of color.

Possible solutions

The Biden-Harris administration has implemented several measures to ease medical debt across the country and soften the landing for millions of Americans. 

• The administration’s American Rescue Plan included funding that will eliminate $7 billion in medical debt nationwide by 2026.
• In June, the White House announced a plan to prevent medical debt from affecting credit reports. The plan, Biden-Harris officials said, would help more Americans buy homes by leading to the approval of an estimated 22,000 additional mortgages a year.
• Vice President Kamala Harris also announced new rules that limit how debt collectors can pursue medical debt and expand patient options to contest erroneous charges or seek better clarity on genuine charges.
• Harris has made resolving the medical debt crisis a big part of her presidential campaign as well, pledging several initiatives if she is elected, including forgiving some $200 billion in debt nationally. 

But the biggest salvo in the decades-long battle came in North Carolina this summer.

‘A life-changing difference’

In July, Gov. Roy Cooper announced he would use the state’s expanded Medicaid program, and the billions in additional federal funding it brings, to push hospitals to forgive a decade’s worth of medical debt for millions of North Carolinians, most of whom would be low to middle-income residents. 

All individuals on Medicaid will qualify, as will anyone receiving other federal assistance benefits as part of the Supplemental Nutrition Assistance Program (SNAP) or Women, Infants, and Children (WIC) program. The plan will also cover debts that exceed 5% of an individual’s annual income if hospital officials have deemed that debt unpayable. 

Weeks later, Cooper announced that all 99 of the eligible hospitals had agreed to participate in his plan.

The deal would amount to some $4 billion in forgiven debt. It would also require the hospitals to come up with a system to prevent new debt and streamline the process for enrolling low-income patients in plans that prevent them from getting any bill at all. 

“Medical debt feels like a disease on the healthcare system itself,” Jonathan Kappler, a deputy secretary in the NC Department of Health and Human Services, said in an interview this week. 

This agreement will “really give a fresh start” to nearly 2 million North Carolinians, he said. But the legwork will fall entirely on the hospitals, not on the patients, he said.

“They’re not going to have to do anything,” Kappler said. 

The plan is the first of its kind in the country, Cooper’s office said.

But while all hospitals eventually agreed to the plan, they initially opposed it for months.

RELATED: Got medical debt in North Carolina? A new state program may help you.

Money talks

“Multibillion-dollar health systems and the industry’s powerful trade group vigorously fought the medical debt plan,” KFF Health News wrote in a deep dive about the negotiation. “They sowed fears of a collapsing rural health care. They warned of legal fights and a showdown with the legislature. And they maneuvered to get the federal government to kill the plan.

None of those efforts worked. 

Cooper and Kody Kinsley, secretary of the NC Department of Health and Human Services, kept up the pressure, and the US Centers for Medicare and Medicaid Services signed off on the plan in late July. 

The deal would mean hundreds of millions of dollars more for the hospitals in exchange for forgiving patients’ debt.

“By signing on to this program, North Carolina hospitals are leading the way in relieving debt and centering the well-being of their communities,” Cooper said in a news release. 

But many say that the hospitals were the biggest drivers of the medical debt, and should not now be heralded as saviors. 

‘It’s where you have to start’

Folwell has been trying to address the issue of medical debt for years, but said he is not a fan of Cooper’s deal.

It lets hospital systems off the hook for the mess they helped cause, he said, and pays them to do what they should have already been doing.

“Why would you bail somebody out who should have done their job to start with?” he asked.

But Kappler defended the approach.

“I would never want to subscribe a value judgment to one individual part of the healthcare system in this country and give some sense that they were the cause of a systemic problem,” Kappler said.

“Hospitals are the place where people go for care when they have no other place to go, so if you’re going to do something about medical debt, that is the place you go first because that’s where most of it is.”

He added: “Hospitals … want to care for their communities. I think that was demonstrated by the fact that they all signed up for this. I think they understand the negative consequences of medical debt.”

Dr. Mell also heaped plenty of blame on the hospitals, but called the plan a positive step.

“It’s where you have to start, because it’s where it is actually affecting the patients,” he said. 

While Cooper and Harris seem to be on the right track, he said, there’s a lot still to do to address the root causes of the problem.

“I would liken it to any other medical process,” Dr. Mell said.

“If we have a well that’s pumping out poison, we first have to treat all the poisoned patients. But at some point we have to address getting the poison out of the well.”

‘Snap of a finger’

For a decade, the Republican-controlled legislature refused to take federal dollars to expand Medicaid, a program offered through the Affordable Care Act.

That resistance was costly. 

Patients in the states that chose to expand Medicaid saw their total medical debt fall and their rates of accumulating new debt slow, a 2021 study showed.

The dam finally broke, however, in 2023. Legislators changed their tune, expanded Medicaid and helped more than 553,000 low-income North Carolinian access healthcare. 

That should help bring debt down too.

But three weeks before lawmakers voted on Medicaid, House Republicans blocked a bipartisan bill that would have made a much bigger dent in the problem.

In March of 2023, a bipartisan group of lawmakers in the NC Senate introduced the “Medical Debt De-Weaponization Act,” a bill that, among other things, would have capped the annual out-of-pocket expenses, prevented hospitals from pursuing the spouses or children of people with debts, and prohibited home foreclosures because of medical debt

“This legislation would’ve catapulted North Carolina from … the worst in the United States to number two in terms of protecting consumers,” Folwell said.

The Senate passed the bill, 48-0. 

But after intense lobbying from hospital groups, the bill died in the House, where House leader Tim Moore declined to bring it to a vote.

The lobbying effort, an investigation by WBTV in Charlotte found, included more than $200,000 in direct political donations to House Republicans, including the maximum amount allowed by law to Moore, Destin Hall, who favored to become the next speaker, and Jason Swaine.

“The sad part is that in a snap of a finger, these hospital executives or boards of trustees or the General Assembly could fix these issues,” Folwell  said.

“People don’t really give a damn about what political party [legislators] are a member of. They just want their problem solved.”