North Carolina Hospitals Agree to Forgive Medical Debt in New Medicaid Initiative

RALEIGH, N.C. — All eligible hospitals in North Carolina have agreed to a new initiative that will increase their Medicaid payments if they forgive the medical debt of low- and middle-income patients and take steps to prevent future debt. Governor Roy Cooper announced this on Monday.

Six weeks ago, Cooper and Health and Human Services Secretary Kody Kinsley proposed a plan to federal Medicaid regulators. The plan aims to help around 2 million people in North Carolina eliminate $4 billion in hospital debt. Hospitals usually only recover a small portion of this debt.

This benefits hospitals, their patients, and their communities,” Cooper said, revealing that all 99 eligible hospitals, including the largest systems in the state, have committed to the voluntary debt relief effort.

The Centers for Medicare and Medicaid Services approved the plan last month. The initiative builds on a Medicaid reimbursement program already in place for 99 hospitals. These hospitals had until last week to decide whether to participate.

Starting in the next few months, changes will take effect, including the elimination of medical debt dating back to 2014 for Medicaid patients by July 1. Hospitals will also forgive debt over two years old for non-Medicaid patients with low incomes or debt that exceeds 5% of their annual income.

Jose Penabad, a board member of Undue Medical Debt, a national organization working with North Carolina hospitals, said, “We often hear that tackling medical debt is impossible, but today’s announcement brings hope.”

Hospitals will also implement programs to prevent future debt. By January 1, they will automatically enroll eligible people in charity care programs if they already qualify for food stamps or other assistance. By July, hospitals will stop reporting unpaid medical bills to credit agencies and cap interest rates on medical debt.

The 99 qualifying hospitals already participate in the Healthcare Access and Stabilization Program (HASP), which was approved by the General Assembly last year along with expanded Medicaid coverage for working adults who don’t qualify for traditional Medicaid. Hospitals contribute funds to secure billions in federal money.

By agreeing to this medical debt initiative, HASP hospitals are set to receive even higher reimbursements. Kinsley’s department estimates that hospitals, which were expected to receive $3.2 billion this fiscal year, could receive $4 billion, with a projected $6.3 billion next year.

Governor Cooper acknowledged that hospitals were initially hesitant about the medical debt initiative because it tied previously unrestricted HASP funds to debt-reduction efforts. However, he said, These hospitals ultimately saw the benefits for their patients and communities and decided to join.

The North Carolina Healthcare Association, which represents nonprofit and for-profit hospitals, stated it is ready to help implement the new debt relief initiative. They also expressed a commitment to addressing the root causes of medical debt and improving access to affordable, high-quality care.

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