1 in 5 North Carolinians is in collections for medical debt. Should lawmakers fix that?
People’s health problems and ensuing medical debt should not be “weaponized” against them, North Carolina Treasurer Dale Folwell said Tuesday, as state lawmakers proposed a bill he helped write that takes aim at hospitals and their billing practices.
Folwell, a Republican, noted the bill’s bipartisan list of sponsors. At one point, he cited Democratic U.S. Sen. Elizabeth Warren of Massachusetts when arguing for the bill. Both Folwell and the bill’s lead sponsor, Republican Rep. Ed Goodwin of Edenton, spoke about experiences they have had with hefty medical bills for thousands of dollars.
“All of us in here have health insurance,” Goodwin told the N.C. House Banking Committee on Tuesday when the bill was up for a hearing. “We really do not worry about it that much, I don’t think. But imagine going to a hospital and being told, ‘Do you have money to pay?’ ‘Well no, I’m an indigent charity case.’”
When that happens, Goodwin said, patients who can’t afford their bills often are given a credit card they can use for their medical bills, groceries or gas.
He questioned the ethics behind that and whether it could lead people further into debt — especially since hospitals are already allowed to take a loss on such cases and write them off on their taxes, in a process known as charity care or indigent care.
“The way they’re being treated now, and the way bills are being paid and things that are being done, do not seem to be proper to me,” said Goodwin, who represents a large part of Northeastern North Carolina that studies show has been hit particularly hard by medical debt.
How big a problem is medical debt?
Americans owe about $88 billion in medical debt, according to a report earlier this year from the federal Consumer Financial Protection Bureau. However, the report also noted that estimating the total is complicated due to the numerous inaccurate bills that health care providers send their patients.
Millions of North Carolinians — more than a third of the state’s population — were in collections for debt as of the end of 2020, the most recent data available, according to research from the Urban Institute. And in most cases, it was for medical debt specifically.
Medical debt alone, not counting credit cards, student loans or other types of debt, has landed over 2 million North Carolinians in collections.
The problem varies greatly by geography. In urban counties like Durham and Wake, the percentage of people in collections for unpaid medical debt tends to be in the low teens. That still represents roughly 200,000 people between those two counties.
But as a percentage, it pales in comparison to more rural counties, where, in many places, nearly half of the entire county is in collections due to medical debt. Take 43% of Duplin County in the southeastern part of the state, for example, and 41% of Cleveland County, west of Charlotte.
A big focus of North Carolina’s bill is helping people improve their credit, or avoid a hit to their credit in the first place, by having fewer people sent into collections for unpaid medical bills. The flip side is that it could cost the health care industry hundreds of millions of dollars, even billions.
Folwell — who has warred with the hospital industry in the past, most notably over the State Health Plan — said the cost is worth it.
“The moral thing to do is to stop weaponizing people’s credit score,” he said.
Folwell said the bill has several main goals, including expanded opportunities for hospitals to write unpaid bills off as charity. While only uninsured patients can qualify currently, the bill would also allow charity care for under-insured patients, like those with high deductible plans. It would also prevent patients from being sent into collections if they’re appealing their bill.
Opposition to the bill
Hospitals have strongly opposed similar pushes in the past, and an industry group accused Folwell of “demonizing” them earlier this year, although no individual hospitals or groups sent a representative to speak on this specific bill Tuesday.
That may be in part because the bill didn’t get a vote after the hearing, and it appears it will be a while before that happens.
Fayetteville Republican Rep. John Szoka criticized pieces of the bill during the hearing and questioned whether some of the information Folwell and Goodwin gave was accurate.
“There are a number of things in this bill that are, quite frankly, disturbing,” he said.
For instance, while much of Folwell’s pitch focused on the claim that a bad credit score could hamper someone’s upward mobility — and potentially even that of their children — Szoka said that’s not true. He cited his background as a mortgage broker, adding: “I’ve probably seen more credit reports than every person in this room combined.”
Szoka also questioned some of the claims supporters made about the special credit cards for medical debt, among other problems he had with the bill.
At the end of the meeting, the committee’s chairman, Rep. Keith Kidwell of Beaufort County, said Szoka should work with Goodwin and Folwell’s office on revamping the bill to get it to a more agreeable state. It’s unclear when, or if, that might happen.
Szoka suggested splitting the wide-ranging bill up into multiple pieces, so that some of the less controversial pieces could pass while the heavier lifting remains to be done on the rest.
But the bill has support beyond its bipartisan list of co-sponsors. The State Employees Association of North Carolina, or SEANC, supports it. So does the North Carolina Coalition Against Sexual Assault, whose attorney Skye David said that assault survivors aren’t supposed to be charged for their rape exam — but that they can still be charged, and possibly later sent into collections, for treating injuries they suffered when they were raped.
“Those costs are not covered,” she said. “And maybe your survivor doesn’t have health insurance, or their insurance isn’t going to cover the whole thing. ... I took a look at some of the different bills I’ve received from survivors, from hospitals. Some of them were over $6,000.”
The bill would also undo a rule that spouses can be held liable for each other’s medical or nursing home debts. An aide to Folwell, Sam Watts, said it dates back to a time when women weren’t allowed to own property and that most states have since gotten rid of similar rules, but North Carolina has not.
This story was originally published June 8, 2022 at 5:55 AM with the headline "1 in 5 North Carolinians is in collections for medical debt. Should lawmakers fix that?."
