New medical debt relief incentive program to level disparities in North Carolina

In July, U.S. Centers for Medicare and Medicaid Services approved a medical debt relief incentive program for acute care hospitals in North Carolina proposed by Gov. Roy Cooper and the N.C. Department of Health and Human Services.

The program intends to forgive all medical debt for patients enrolled in N.C. Medicaid beginning from 2014 and grant discounts on medical bills for patients with incomes at or below 300 percent of the federal poverty level.

Acute care hospitals — which provide emergency services for patients with urgent medical conditions — are the only type of hospitals eligible for this program. They are one of the primary care providers for rural areas with concentrated low-income populations, where medical debt tends to be more prevalent.

Medical debt in North Carolina

North Carolina has the 4th highest percentage of people with medical debt in the country. According to 2022 data from the Urban Institute, 20 percent of North Carolina residents have medical debt — equating to more than 2 million individuals.

In some counties, including Anson County and Greene County, over 40 percent of residents have medical debt.

According to a study conducted by Duke University School of Law, state hospitals sued over 7,500 patients between January 2017 and June 2022 to collect medical debt through interest charges. The hospitals won over $57 million.

“People have a higher fear of the medical bill today than they do the medical procedure,” N.C. State Treasurer Dale Folwell said. “Nobody consumes healthcare in the state, it consumes them.”

In May 2023, the N.C. Senate unanimously passed Senate Bill 321 — the Medical Debt De-Weaponization Act. The bill served as a consumer protection statute to prevent healthcare creditors from using unfair methods of medical debt collection. After passing through the Senate, the bill was referred to the N.C. House and has not since moved.

How medical debt affects communities

Karida Giddings, the healthcare program coordinator for the North Carolina Black Alliance, said medical debt is intertwined with issues including housing disparities and food insecurity. 

In a meeting, Giddings said she heard about a North Carolina resident who lost partial equity of his house to settle over $20,000 in medical debt after his wife died. 

Insurance companies deny many claims for medications or surgeries that providers deem medically necessary, causing patients to pay out of pocket, Kate Daley, the health justice campaigner for Down Home North Carolina, said. Down Home North Carolina is an organization serving working-class people and rural communities.

“People with a higher income have the ability to set up payment plans and pay off their debt, but if you live on a fixed income or a low income, you're in a position of making really impossible choices between health care and housing and food and other basic necessities,” Daley said.

Giddings also said communities of color, particularly in rural areas, are disproportionately impacted by medical debt due to a lack of resources from hospital closures and the delay in expanding Medicaid in North Carolina.

25 percent of North Carolina residents in communities of color experience medical debt — a five percent increase from the state average, according to 2022 data from the Urban Institute. 

“It's often a result of their lived environment as well,” Giddings said. “They didn't really have access to the health care that they needed and should have had access to in the first place where they may have had more affordable options, and they [had to] default to going to emergency departments because of the absence of facilities with primary care providers.”

Impact of medical debt relief

Due to a rise in high deductible health plans and inadequate insurance, people are talking more openly about the challenges of medical bills they cannot afford, Eva Stahl, the vice president of policy and programs at Undue Medical Debt, said.

“It's really important that — as we make these changes in policy that are so important for improving health care access — that we're also still collecting data and understanding how many bills are going unpaid and how that is affecting everyday people,” Stahl said.

Daley said the medical debt relief program proposed by Cooper will mitigate the wealth gap and provide the economic and psychological safety that people need.

“It can really help to level the playing field and level those disparities that are really harming people, and give patients more peace of mind about their medical expenses,” she said.

On Aug. 12, Gov. Cooper announced that all acute care hospitals in the state have agreed to implement the medical debt relief program, including UNC Hospitals, WakeMed hospitals and Atrium Health hospitals.

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