US regulators OK North Carolina Medicaid carrot to hospitals to eliminate patient debt

Federal Medicaid regulators have signed off on a proposal by North Carolina Gov. Roy Cooper 's administration to offer scores of hospitals in the state a financial incentive to eliminate patients' medical debt and carry out policies that discourage future liabilities.

Cooper’s office said Monday that the Centers for Medicare and Medicaid Services late last week approved the plan submitted by the state Department of Health and Human Services.

Cooper and health department leaders have described the plan as a first-of-its-kind proposal in the country to give hospitals a new financial carrot to cancel debt they hold on low- and middle-income patients and to help residents avoid it. The effort also received praise Monday from Vice President Kamala Harris, the likely Democratic presidential nominee.

Cooper's administration has estimated the plan has the potential to help 2 million low- and middle-income people in the state get rid of $4 billion in debt. Cooper has said hospitals wouldn't recoup most of this money anyway.

“This debt relief program is another step toward improving the health and well-being of North Carolinians while supporting financial sustainability of our hospitals,” state Health and Human Services Secretary Kody Kinsley said in a release.

The proposal, which DHHS will now work to carry out, focuses on enhanced Medicaid reimbursement payments that acute-care, rural or university-connected hospitals can receive through what's called Healthcare Access and Stabilization Program.

The General Assembly approved this program last year along with provisions sought by Cooper for years that expanded Medicaid coverage in the state to working adults who couldn’t otherwise qualify for conventional Medicaid.

Any of the roughly 100 hospitals participating in the program are now poised to receive even higher levels of reimbursement if they voluntarily do away with patients’ medical debt going back to early 2014 on current Medicaid enrollees — and on non-enrollees who make below certain incomes or whose debt exceeds 5% of their annual income.

Going forward, the hospitals also would have to help low- and middle-income patients — for example, those in a family of four making no more than $93,600 — by providing deep discounts on medical bills. The hospitals would have to enroll people automatically in charity care programs, agree not to sell their debt to collectors or tell credit reporting agencies about unpaid bills. Interest rates on medical debt also would be capped.

When Cooper unveiled the proposal July 1, the North Carolina Healthcare Association — which lobbies for nonprofit and for-profit hospitals, said the group and its members needed more time to review the proposal and awaited the response from the federal government.

Speaking last week at a roundtable discussion in Winston-Salem about the effort, Cooper said hospitals have “reacted somewhat negatively" to the effort. But many hospitals have engaged with us and and given us advice on how to write the procedures in order to help them if they decided to adopt this,” Cooper added.

State officials have said debt relief for individuals under the program would likely occur in 2025 and 2026. Cooper’s term ends in January, so the program’s future could depend on who wins the November gubernatorial election.

Other state and local governments have tapped into federal American Rescue Plan funds to help purchase and cancel residents’ debt for pennies on the dollar.

The vice president's news release supporting North Carolina's effort didn't specifically mention Cooper, who is considered a potential running mate for Harris this fall. Harris highlighted efforts with President Joe Biden to forgive over $650 million in medical debt and to eliminate even more.

“Last month, I issued a call to states, cities, and hospitals across our nation to join us in forgiving medical debt,” she said. “I applaud North Carolina for setting an example that other states can follow.”