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Lower-income patients could have medical debts wiped away under new state policy proposal

North Carolina Health and Human Services Secretary Kody Kinsley, center, speaks while Dave Alameida with the Leukemia Lymphoma Society, left, and Gov. Roy Cooper listen at an Executive Mansion announcement on Monday July, 1, 2024, in Raleigh, N.C. The Cooper administration unveiled a plan it wants federal Medicaid regulators to approve that would give hospitals enhanced reimbursements in exchange for them providing medical debt relief to low- and middle-income residents for past charges and discouraging debt in the future. (AP Photo/Gary D. Robertson)
Gary D. Robertson/AP
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AP
North Carolina Health and Human Services Secretary Kody Kinsley, center, speaks while Dave Alameida with the Leukemia Lymphoma Society, left, and Gov. Roy Cooper listen at an Executive Mansion announcement on Monday July, 1, 2024, in Raleigh, N.C. The Cooper administration unveiled a plan it wants federal Medicaid regulators to approve that would give hospitals enhanced reimbursements in exchange for them providing medical debt relief to low- and middle-income residents for past charges and discouraging debt in the future. (AP Photo/Gary D. Robertson)

Patients with large medical debts could see relief soon under a new state policy that would increase Medicaid funding to in-state hospitals that agree to clear the debts.

“Large medical bills from sickness or injury can cripple the finances of North Carolinians, particularly those who are already struggling,” Gov. Roy Cooper said in a news release on Monday. “Freeing people from medical debt can be life changing for families, as well as boost the overall economic health of North Carolina.”

Several groups of patients would be eligible for debt relief back to Jan. 1, 2014, including those with incomes at least at or below 350% of the federal poverty level (FPL), those whose total debt exceeds 5% of annual income and those who are enrolled in Medicaid.    

For a single person, 350% of the federal poverty level is $52,710 annually. For two people, it is $71,540 and for a family of four, it is $109,200.

People ages 19-64 are eligible for Medicaid if their monthly income is $2,351 or less. Seniors are eligible if the monthly family income is $1,704/month or less.

Under the proposal, patients at or below 300% of the federal poverty level could receive discounts on medical bills of between 50-100%, depending on income.       

The N.C. Department of Health and Human Services (NCDHHS) announced in a press release on Monday that the proposed actions would potentially relieve medical debt for approximately two million low and middle-income North Carolinians.

In Western North Carolina, 11 out of 14 counties have a higher percentage of residents with medical debt in collections than the national average of 13%.

Cherokee County has the highest percentage of medical debt among residents of the region at 20%. In Cherokee County, the average amount of medical debt in collections is more than $1,000 per person, according to the Urban Institute

Part of the proposed regulations would include hospitals agreeing to not report many low-income patients’ outstanding medical debts to credit reporting agencies.

Officials said NCDHHS submitted a request to the U.S. Centers for Medicare and Medicaid (CMS) to approve new regulations for hospitals under the Healthcare Access and Stabilization Program (HASP). Participating hospitals would receive enhanced payments from federal funds allocated under North Carolina’s expanded Medicaid program.

As reported by the Associated Press on Monday, NC legislators created HASP last year for hospitals to expand Medicaid coverage to working adults who couldn’t qualify for conventional Medicaid. Close to 500,000 people have enrolled for the expanded Medicaid since last December.

Cooper said the proposed plan has the potential to wipe away nearly $4 billion in medical debt which is a leading cause of bankruptcy in the United States.

If approved by CMS, hospitals must implement the debt relief policies to be eligible for enhanced payments under HASP. Under the policy, hospitals would also be required to screen and automatically enroll patients into financial assistance, known as charity care.

Health care systems would also be prohibited from selling any medical debt for certain low-income consumers.

According to the website, the Department expects participating hospitals to begin to forgive debt in 2025 and 2026.

"Patients do not need to take any action now," the website said. "Participating hospitals will work with a third-party vendor to identify outstanding debt that is eligible for relief."

Jose Sandoval is the afternoon host and reporter for Blue Ridge Public Radio.