Failing North Carolina on Medical Debt

July 5, 2022

North Carolina has some of the worst burden of medical debt in the country. According to a recent Urban Institute study, which examined credit bureau data from 2021, North Carolina contained 12 counties with some of the highest share of adults with medical debt in collections in America. Counties like Greene, Lenoir and Anson each had more than 40% of their adult residents with medical debt in collections status:

Uniquely among wealthy countries, medical consumer debt is a major problem across the United States – but especially in states that have failed to expand Medicaid, like North Carolina. According to a recent survey from the Kaiser Family Foundation, 41% of American adults currently carry debt from medical or dental bills, and that debt is one of America’s leading causes of personal bankruptcy. But bankruptcy is hardly the only hardship that medical debt inflicts. Besides draining savings, medical debt can badly hurt one’s credit score, which can derail things like job applications, finding housing or especially one’s credit card interest rate.

Expanding Medicaid, as Republican leaders once again failed to do in this year’s legislative session, would be one major step towards bringing down medical debt. But there is so much more to be done. Only weeks ago, a bipartisan group of legislators proposed some significant and positive steps toward “de-weaponizing” medical debt – essentially, making it easier to manage and less disastrous to people’s finances. Sadly, this sensible and moral legislation was soundly rebuffed by deep-pocketed healthcare lobbyists. This was a loss for North Carolina. State leaders should work together to address the awful blight of medical debt on our state’s residents, and worry a bit less about the interests of the corporate healthcare lobby.

Easing Medical Debt

House Bill 1039, titled the “Medical Debt De-Weaponization Act,” was sponsored by two Republicans and two Democrats, and boasted a thoroughly bipartisan group of 41 other co-sponsors ranging from the far-right to the relatively progressive ends of the political spectrum. Even State Treasurer Dale Folwell, widely rumored to have his eye on the Republican nomination for governor, appeared to speak in favor of the bill when it was heard. The issue of medical debt is felt heavily throughout the state, in urban and rural areas alike, making it a significant issue for voters of every stripe.

According to a national study by the Innovation for Justice lab at the University of Arizona and the University of Utah, North Carolina ranks 28th in the nation – in the “Weak” category – for its medical debt protection policies. House Bill 1039 aimed at reforming many of those policies, such as:

  • Capping the maximum interest rate on medical debt at 5%
  • Reversing a rule that spouses can be held liable for each other’s medical or nursing home debts (a holdover from an era when women could not own property)
  • Prohibiting home foreclosures due to medical debt
  • Obliging hospitals to provide care free of charge or at a sliding scale to very low-income patients, depending on their household income

On its face, the bill sounds like a slam-dunk. But then, the lobbyists got involved.

It should probably come as no surprise that healthcare companies are deeply skeptical of any measures that would limit their ability to recover costs. Some of them are in an understandably difficult position – after all, hospitals are unable to capture reimbursements from hundreds of thousands of patients due to North Carolina’s obstinate failure to expand Medicaid, which has forced many of the state’s rural hospitals to close their doors forever.

Yet the corporate healthcare lobby is also one of the biggest employers of lobbyists in Raleigh, and among the biggest donors of corporate PAC cash. Blue Cross/Blue Shield NC, the NC Hospital Association, the Healthcare Facilities Association and others collectively spend millions on each legislative election cycle. Few know that better than Republican Rep. John Szoka. The Cumberland County Republican, who has accepted significant campaign support from the healthcare lobby, was very critical of HB 1039 when it was heard in committee, and ultimately helped seal its fate. The bill was killed with little fanfare, never making it out of committee. In a short session that was marked by almost a total failure by Republican leaders to actually pass their own agenda, at least some of the lobbyists got the wins they were looking for.

What’s next?

House Bill 1039 might have been sent out to pasture (much like John Szoka, who was sacrificed during redistricting), but the problem of medical debt is not going away. Indeed, until North Carolina’s legislature makes up its mind and expands Medicaid, the problem will get worse.

America is the only wealthy nation on Earth that tolerates its citizens going bankrupt because they cannot pay bills incurred for getting cancer or being injured in an accident. Universal healthcare may be complicated, but it is the solution that has made this a “solved problem” in every other wealthy country in the world. That, however, will have to wait for Washington to sort out its issues. In the meantime, millions of North Carolinians will struggle with onerous medical bills from a Kafkaesque and frequently cruel healthcare finance system. Our state’s leaders have the ability to ease the burden. But until they put their constituents’ interests before the corporate healthcare lobby, little is likely to change.

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