Time is running out for North Carolina’s State Health Plan.
But a solution exists, and N.C. Treasurer Dale Folwell — up for re-election Nov. 3 — is ready to help.
North Carolina’s taxpayers are on the hook for $35 billion in unfunded liabilities. Their State Health Plan is set to go broke in three years. When the bill comes, state employees will face benefit cuts, or taxpayers will have to make up the difference.
Folwell blames hospitals. He believes state employees are exploited by a broken system, and that taxpayers are footing the bill. Describing the current plan as a blank check, Folwell declared his duty to rip it up.
He launched a reform that’s radical in the bureaucratic world of health care — rescuing the failing State Health Plan with price transparency.
It’s a strategy with a history of success in another state. Price transparency helped a fiery reformer in Montana prevent health care from breaking the state’s bank. But to achieve similar success, Folwell will have to defeat hospital pushback and outlast the November election.
Folwell originally planned to pay hospitals almost double Medicare’s rates, and taxpayers would reap $166 million in savings. But that money had to come from somewhere — and hospitals rebelled against losing millions.
Negotiations collapsed into a game of chicken with coverage at stake for 720,000 state employees. Deadlines passed, hospitals held out, and state employees panicked. Clear pricing collapsed in 2019.
Fixing the plan would have to wait. That’s bad news for workers across the state.
“Health care is taking about half of your wage increase,” said Gerard Anderson, professor of health policy and management at Johns Hopkins University. “Education, infrastructure, national defense — everything else gets taken up by increased spending on health care.”
But Montana succeeded where North Carolina could not.
Montana was in trouble in 2014. Saddled with a failing health care plan, lawmakers froze wages for state employees. The ballooning cost of health care threatened to send the plan $50 million into the red within a few years.
The state chose Marilyn Bartlett to stave off fiscal ruin. A fiery certified public accountant with a past working for the other side, Bartlett drives a smart car with vanity license plates that read “DR” and “CR” — the Latin abbreviations for “debit” and “credit.”
Bartlett would upend the system, rack up enemies, and save the health care of state employees.
Under her reforms, the plan saved $15.6 million in 2019 — more than $1 million a month — and grew a reserve fund strong enough to support teacher pay raises. Along the way, Bartlett ranked 13th in Fortune Magazine’s World’s 50 Greatest Leaders of 2019.
But Bartlett immediately ran into the same barriers as Folwell. The plan’s manager, Cigna, told her its contracts and prices were secret. But what she did find helped explain why state employees’ health care had no future.
The state was getting fleeced.
For a common knee replacement, some hospitals were charging the state four times more than others. One hospital collected $23,250 after giving a 7% discount. Another hospital offered a 10% discount but billed the state $103,500 for the same surgery, with no complications and a one-night hospital stay, reported ProPublica.
Bartlett fired Cigna. That year, their representative sent everyone in her office Christmas globes. She didn’t get one.
“I got pushback from every arena imaginable,” Bartlett told Carolina Journal.
Hospital executives scheduled meetings with the governor. Bartlett greeted them at the table. Industry lobbyists shredded her in legislative meetings. Bartlett showed graphs of hospital profits.
But time was running out. With a month left before rollout, six of the major hospitals were still boycotting the plan.
“I was scared half the time, I didn’t know if this was going to work, but I wouldn’t admit it,” Bartlett said. “God, when I think about it, it was awful, to be honest with you.”
Like Folwell, Bartlett faced the prospect of blowing up the coverage of thousands of state employees.
“I think they thought we would back off,” Bartlett said.
Instead, she posted the private numbers and addresses of hospital leadership online. Union leadership rallied. Irate state employees swamped hospitals with feedback. The last hospital joined.
“You have to be willing to walk. I realized that I was putting plan members at risk,” Bartlett said.
Bartlett had advantages Folwell lacks. Montana had only 30,000 state employees, lower spending, and a comparatively weak hospital system. But reformers believe her success can be scaled to revolutionize health care costs across the nation.
“Anybody on the side of secrecy in pricing will be on the wrong side of history,” Folwell told CJ.
“Telling someone that they don’t have benefits is harder than telling a hospital that they need a haircut,” Anderson said.
Folwell is running against Democratic candidate Ronnie Chatterji, who has been endorsed by hospitals’ lobbying arm, the N.C. Healthcare Association. Chatterji has slammed Folwell’s reforms.
“Is it worth the battle that you’re probably going to lose?” Bartlett said. “To me, it was worth the battle. But I didn’t have anything to lose, I was ready to retire.”