RALEIGH, N.C. — More than 2.5 million North Carolina residents are getting over $6.5 billion in medical debt eliminated through a state government effort that offered hospitals extra Medicaid funds from Washington if they gave low- and middle-income patients the financial relief and implemented policies to discourage future liabilities.
Democratic Gov. Josh Stein, the state health department secretary and other officials announced Monday results so far from what then-Gov. Roy Cooper unveiled 15 months ago as a first-of-its-kind initiative.
While helping almost one-quarter of North Carolina residents, Stein said the effort has exceeded expectations in giving individuals and families a second chance to succeed financially after medical crises.
Officials previously estimated it could help about 2 million people get rid of $4 billion in debt. The debt that had been held by hospitals, and are usually difficult to recover, will be pulled from credit reports, the governor said.
“This is life-changing news for so many families,” Stein said, adding that recipients on average will have $2,600 erased. “No one chooses to have a heart attack or get diagnosed with a chronic condition — you just have to deal with it. Today’s announcement will free people from the financial stress so that they can focus on getting healthy.”
Another news conference speaker described patients who avoided services or threatened to halt treatments to prevent more debt from accumulating on themselves or their family.
Hospitals that agreed to participate have already alerted many patients to tell them their debt is essentially canceled, state health officials said Monday. And Undue Medical Debt, a national group working on the effort and taking over some hospital liabilities, plans to send 255,000 notices this week to other recipients.
The effort germinated from what’s called the Healthcare Access and Stabilization Program, which state legislators approved in 2023 at the same time as expanded Medicaid coverage to working adults who couldn’t otherwise qualify for conventional Medicaid.
Hospitals pay assessments to draw down billions of dollars in federal money.
The state Department of Health and Human Services last year proposed that certain hospitals could receive higher program reimbursement levels to treat Medicaid enrollees if they agreed to medical debt initiatives. The federal Centers for Medicare and Medicaid Services signed off on the plan details, and by August 2024 each of the roughly 100 acute-care, rural or university-connected hospitals that qualified decided to participate.
Under rules previously announced, the hospitals had to eliminate medical debt going back to early 2014 for patients who are Medicaid enrollees. They also would later have to eliminate other debt for non-enrollees based on income levels. And the hospitals were directed to discourage debt by doing things like automatically enrolling people in charity care programs or curbing certain debt collection practices.
The $6.5 billion figure includes debt relieved directly through the initiative and through hospital policy changes to implement it, Stein’s office said.
Other state and local governments have tapped into federal American Rescue Plan funds to help purchase and cancel residents’ debt. Arizona Gov. Katie Hobbs announced in July that $429 million in medical debt had been erased for more than 352,000 state residents.
“North Carolina’s approach is completely unique,” said Jose Penabad, the Undue Medical Debt vice chair. Several states are following North Carolina’s use of Medicaid incentives closely, he added.
North Carolina debt eradication exceeded initial estimates in part because patients outside the population being targeted also had their debt eliminated, Stein said.
Hospitals, for example, sometimes have eliminated debt for patients incurred at associated physician practices, said Jonathan Kappler, a state deputy health secretary. More debt will be eliminated in the future, he added.
State health secretary Dr. Dev Sangvai told reporters the law approved by Congress in July that made cuts and policy changes to Medicaid won’t immediately affect the debt elimination initiative.
Some hospitals were initially hesitant about the debt relief initiative because new requirements were being placed upon the reimbursements, Cooper said last year.
The North Carolina Healthcare Association, which lobbies for nonprofit and for-profit hospitals, said Monday in a statement that it’s concerned “recent and proposed government policies could add financial pressures” that prevent hospitals from expanding programs to help low-income patients.
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