Out-of-control Health Care Inflation Is Punishing the Future of North Carolinians

By State Treasurer Dale R. Folwell, CPA

The ever-increasing cost of medical care is suppressing wages, sapping retirees’ cost-of-living adjustments and potentially weaponizing their credit scores. Every dollar inefficiently spent on health care is a dollar that can’t support the pension plan, public education, public safety and transportation. With inflation at a 40-year high, we face potential double-digit increases in hospital prices. pharmaceutical and medical costs. We need health care price transparency and accountability in medical debt to drive down costs.

North Carolinians already struggle to afford health care. One in five North Carolina families are in collections for medical debt. Seventy percent of Americans say medical debt has kept them from achieving life’s milestones, including having children or buying a house.

One of the ways to help people break out of generational poverty is to reform medical debt. No one wants to be in a car accident or to get cancer. The nature of how you get medical debt is different, and it should be treated differently. It’s not in the same category of buying furniture for your house. Being sick is not a deliberate choice. A life-saving surgery should not cost a life savings.

No one wants to consume this product, but when they have to, no one will tell them what it costs. Even at one hospital, a knee replacement could cost anywhere from $22,865 to $101,571. Patients can’t find out their bills until it’s too late, but hospitals can still destroy patients’ financial health. Atrium Health alone has sued hundreds of patients over medical debt, including during the pandemic.

Charity care is supposed to protect our most vulnerable patients — but too many hospitals are failing their charitable mission. As the state treasurer responsible for state employees’ health care, I found that most of our large hospital systems didn’t give enough charity care to justify an estimated $1.8 billion in tax exemptions. Instead, some hospitals billed more than $149.2 million to poor patients, according to studies by Johns Hopkins Bloomberg School of Public Health, the National Academy of State Health Policy, Rice University’s Baker Institute and the N.C. State Health Plan for Teachers and State Employees. Additionally, these unpaid taxes are the primary sources of funding for public education, safety, works and roads.

In North Carolina, many nonprofit hospitals are making outsized profits on the backs of sick people. After revenue like investments, North Carolina hospitals enjoyed a 10.91% average net profit margin — higher than the margins of cable TV, nearly triple the margins of farming and agriculture and almost equal to the margins of the alcoholic beverage industry in 2019.

This is not about the frontline workers who saved my life when I was hospitalized with COVID-19 in March 2020. It is about the multimillion-dollar executives who run multibillion-dollar corporations disguised as nonprofits. Atrium Health alone had $8.4 billion in unrestricted reserves in 2020. Its top 10 executives earned so much that their $26.7 million combined compensation equaled a tenth of the system’s charity care spending in 2020.

I am calling for legislation to protect patients. There is little accountability over nonprofits’ charity care at the federal level, where the IRS cannot even demonstrate that it is consistently reviewing hospitals’ community benefits, according to the U.S. Government Accountability Office. Let’s create a meaningful set of consumer protections for North Carolinians that include increased oversight, greater accountability and a requirement that dollars meant for charity care be spent on charity care.