A discussion was held in the N.C. House Banking Committee Tuesday on the Medical Debt De-Weaponization Act, which is being touted as a law that would protect those who have a hard time paying medical debt. H.B. 1039 is geared toward setting transparent parameters around the provision of charity care and limiting the ability of large medical facilities to charge unreasonable interest rates and employ unfair tactics in debt collection.

“I have found out that many times, a (charity care) patient is talked into taking a medical credit card,” said Rep. Ed Goodwin, R-Chowan, one of the primary co-sponsors of the bill. “They are told they can use the credit card to help pay their medical bills, gas, groceries, or whatever they would like. Now you are preying on an indigent charity case. Predatory lending is how I refer to that.”

Rep. Howard Hunter, D-Hertford; Rep. Bobby Hanig R-Currituck; and Rep. Billy Richardson, D-Cumberland, are the other primary co-sponsors of the bill.

The bill is due in part to legislators’ reaction to the October 2021 report by Johns Hopkins Bloomberg School of Public Health and the North Carolina State Health Plan that found most North Carolina hospitals aren’t honoring their commitments to charity care.  The report found that hospitals took in more than $1.8 billion in tax breaks, while “charity care” spending didn’t surpass 60% of the tax exemption’s estimated value across most of the state’s largest health systems. About 25 of 100-plus non-profits outspent tax breaks with charity care.

Perhaps the biggest champion of the bill is State Treasurer Dale Folwell. So much so, that he put himself in medical debt collections to see what people are facing when it happens to them. “Last fall, I went to get an MRI with contrast, he said. “I was there for 8 minutes, and it cost $6,000 and they wanted $1500 at the point of sale. I gave them $500 because I wanted to purposely put myself in debt collection to see how many phone calls, texts, and letters I would get every day based on this particular medical experience.”

He said he could pay off the medical bill today, but he wants to truly understand what’s happening with the situation.

Folwell said this bill is the moral thing to do and has nothing to do with politics, race, or gender and that credit scores need to stop being weaponized against people who were sick at the time, because it can possibly destroy their upward mobility, possibly for generations.

A report released by the Treasurer’s office in January showed that low-income patients were being billed when they were eligible for charity careThe report, compiled by the N.C. State Health Plan and the National Academy of State Health Policy, and peer-reviewed by Rice University researchers, states that in 2019, 12 to almost 30% of bad debt, or $150 million, was charged to poor patients that were eligible for free or discounted charity care, despite lucrative tax breaks the nonprofit hospitals received to offset the care given, valued at more than $1.8 billion in 2020.

Folwell said not only do credit scores determine what a person will pay for a cell phone, basic liability insurance on a car, renting, or buying a house, but it also may affect obtaining employment.

“I chair the state banking commission,” he said. “I can tell you there are certain jobs that people can’t get in certain financial institutions because of their credit score. Not because they committed a crime but because they got sick.” He also said that people have liens on their houses because of medical debt.

The legislation would require health-care facilities to develop a Medical Debt Mitigation Policy that would build on an existing framework of financial assistance plans under the federal Affordable Care Act. It would establish a set of steps that must be followed before someone is billed including posting and publicizing the policy, posting prices online using easy-to-understand language, screening patients for eligibility for public-assistance programs, and mandating charity care for patients at 200% of the federal poverty level or below.

It would also require a clear pricing structure to offer a transparent sliding scale of policy discounts for patients between 200% and 400% of the federal poverty level and a predictable maximum amount that could be charged during a 12-month period for those patients. The bill would prohibit interest charges to patients who receive the policy discounts, suspending debt collections during insurance appeals for underinsured patients.

The policy would also shield family members from medical and nursing home debts incurred by a spouse or parent, require detailed receipts of payments, and prohibit credit reporting of unpaid debts within one year after a patient is billed.

Patients who are also found to be eligible for discounts after being billed could receive a rebate.

Rep John Szoka, R-Cumberland, criticized the bill and said it “wasn’t ready for primetime” with a number of things that disturbed him, including indigent people receiving credit cards.  “I would like to see proof of that,” he said.  “Care Credit cards can’t be used for groceries. They can be used for vets (veterinarians), doctors, etc.”.

He also disagreed that a bad credit score can generationally hurt people, as he works in the residential mortgage field and sees credit scores all the time and there are ways for people to fix their credit scores. He also said medical debt is looked at differently in the credit scoring system by all three credit bureaus, Experian, Equifax, and TransUnion.  “They don’t count as much and sometimes they don’t count in the score at all,” he said. “When you say the credit score is weaponized, that’s an interpretation. If you have something show up on your credit score that you disagree with, you can dispute it.”

Szoka said the Consumer Financial Protection Bureau is looking at medical debt and credit scores and are trying to address the problem. He also said it should be the responsibility of Social Services to determine if a person has the ability to pay a medical bill and not a hospital finance clerk.

The bill will be looked at with further discussion before being brought back before the Banking Commission.