News: CJ Exclusives

Folwell’s public concerns about State Health Plan, public pensions show commitment to transparency

State Treasurer Dale Folwell. (YouTube screenshot).
State Treasurer Dale Folwell. (YouTube screenshot).

During Sunshine Week — seven days highlighting the public’s right to know about what happens behind the government’s closed doors — much of North Carolina’s health care system remains in the shade.

State Treasurer Dale Folwell wants to rescue the State Health Plan with price transparency. The plan is due to go broke in three years, and unlike other public officials who might prefer burying bad news, Folwell hasn’t been ashamed to talk about the SHP’s woes. With $35 billion in unfunded liabilities, state employees face cuts in their care or raises in their premiums — unless reforms can save the plan.

His candor about the condition of the State Health Plan is an example of Folwell’s commitment to transparency. He has offered regular public updates of the state of North Carolina’s public pension plans during the recent market meltdown. In a news release emailed Wednesday, March 18, Folwell tried to calm pension members.

“Despite the S&P 500 tumbling more than 21%, the state’s pension plans’ investments are down a little more than 8%. This is due to the conservative management philosophy of Treasurer Folwell and other treasurers for the past 50 years,” the email said.

When Folwell headed the Division of Employment Security in Gov. Pat McCrory’s administration, he sounded the alarm about a $2.8 billion unfunded liability in the state’s Unemployment Insurance Trust Fund. The debt to the federal government ran up during Gov. Bev Perdue’s administration.

The General Assembly took heat for cutting benefits to retire the debt. But those measures wiped out the debt in less than two years. The fund now has $3.9 billion available for benefits, as the reforms from several years ago have remained in effect and the fund’s balance has grown.

With the State Health Plan, Folwell blames inflated prices and “secret contracts” for its financial woes. But his Clear Pricing Project was blocked last year, when all but a handful of hospitals boycotted the reference-based pricing that would tie payments to Medicare. 

“Our efforts continue to be stymied by the hospital association that uses cartel-like activities to hide their health care prices for those who teach, protect, and serve,” Folwell said. “People deserve to know what they’re paying.”

Last year, Folwell was warring with the hospital system, as negotiations spiraled into personal attacks and things became increasingly tense.

Folwell blasted hospitals for price-gouging and “cartel-like behavior.” He accused them of exploiting state employees with “secret contracts and higher costs.” Hospitals retaliated, while still voicing their support for transparency. They protested they couldn’t disclose prices because of their contracts with Blue Cross Blue Shield N.C.  

The UNC Hospitals system funded ads from third parties attacking Folwell. Frank Kauder, assistant director of finance for Moses Cone Hospital in Greensboro, penned an email advising state leaders to “burn in hell, you sorry SOBs.”

Folwell’s allies leapt into the fray. The State Employees Association of North Carolina ramped up personal attacks against the “cash stash” of hospital leaders, devoting a site to Vidant Health’s CEO Dr. Michael Waldrum, dubbing him

SEANC has long pushed transparent pricing for its members. Its campaign began in 2011, when State Auditor Beth Wood warned the plan was at significant risk of overpaying. Worse, Wood said, she couldn’t tell whether the plans’ payments were correct because she couldn’t access BCBSNC’s contracts.

“It is insane, it’s not right. You wonder, what am I actually paying for,” said Ardis Watkins, SEANC executive director. “To us that simply meant an unwillingness to embrace transparency. I don’t know why they don’t want transparency, but I don’t infer good things from it.”

A similar strategy to Folwell’s saved the State of Montana Benefit Plan $13.6 million over three years, without closing the doors of local hospitals.

But Folwell’s CPP would have cost hospitals dearly. Vidant Health alone could lose $38 million each year, and Cone Health said it would bleed $26 million from Folwell’s reimbursement rates. Hospital leaders argued that they would suffer more than Montana hospitals because Montana expanded Medicaid. 

The North Carolina Healthcare Association, which represents hospital groups, failed to respond to a request for comment.

“Price transparency is giving the power back to the patients, so the providers have to compete,” said Jordan Roberts, John Locke Foundation health care analyst. “The market reacts to the patient, instead of the patient reacting to all of these market factors they can’t control.”