NC has a medical debt epidemic. It can be fixed.

A funny thing happened on the way to Medicaid expansion: it turns out not to be the coverage solution we thought it’d be.

Even as thousands enroll in these long-sought health benefits, North Carolinians remain vulnerable to the financial consequences of illness, with many seeing their homes foreclosed and their assets dwindled because of the suffocating cost of medical care.

According to a recent survey, 41% of working-age Americans have trouble paying their medical bills. These include the uninsured and the insured, those with commercial insurance, Medicare and Medicaid. Having health insurance no longer means having protection. For many, health insurance isn’t really even insurance.

North Carolinians are especially vulnerable, as N.C. providers have historically been unforgiving to patients who haven’t paid. More than one in five N.C. families — fourth most in the nation — are subject to medical debt collection actions, and N.C. hospitals have sued thousands of former patients, including claims for high interest payments and liens on homes. Among those sued was a 70-year-old couple assessed more than $100,000 in interest alone.

More troubling, nonprofit hospitals are the leaders in suing patients for medical debt. Human Rights Watch has called these “wolves in sheep’s clothing,” decrying that “unscrupulous nonprofit hospitals can hide among their responsible peers, benefiting from their public perception and tax-status as charitable institutions while engaging in extractive and exploitative practices.”

Many causes are to blame for the medical debt epidemic. Healthcare providers keep increasing prices. Insurance products keep covering less. And opaque prices prevent patients from shopping for affordable alternatives. Some hospitals have engaged in more pernicious strategies by skirting charity care obligations, hiding behind convoluted billing practices, and partnering with private equity companies offering “medical credit cards” with an 18% interest rate.

Medical debt is different from other sources of debt, including from credit cards, mortgages and student loans. Medical debt is not a consequence of bad financial decisions. No one wants to suffer from chronic illness or require expensive surgery, and the triggers of medical debt are beyond one’s control. Judicious shoppers can limit expenses, buy used instead of new cars or pursue scholarships, patients are not informed of the prices they will be charged, even immediately before care.

Medical debt is also different because its consequences undermine the very purpose of medicine. Simply put, medical debt is a source of bad health. Those with medical debt are more likely to skip medical care, even for emergencies, and medical debt crowds out expenses that would otherwise promote health and well-being. It can also harm credit ratings, preventing former patients from obtaining new credit, renting apartments or qualifying for jobs. Plus, debt and debt collections cause hypertension and physiological stressors that exacerbate chronic illnesses.

Fortunately, this is a relatively easy problem to solve, and many other states have worked to eliminate or prevent medical debt. Some use state healthcare funds to cancel medical debt owed by residents. Others have capped interest rates for medical debt, stopped creditors from garnishing wages or putting liens on homes, or prevented medical debt from hurting credit ratings. Some states have sought to solve more fundamental problems, such as requiring hospitals to disclose prices in clear terms or determine whether patients qualify for charity programs before receiving care.

With the threat of medical debt hovering over so many North Carolinians, there is no safety net. If Medicaid expansion is to mean anything, and if being home to the nation’s leading healthcare providers is to mean anything, then our state must confront the reality that the health sector itself makes people vulnerable. The job of enacting sensible and ethical health policy is nowhere near done.

Barak Richman, a Professor of Law at Duke University from 2003-June 2024, is the Alexander Hamilton Professor of Law at George Washington University Law School.