Politics & Government

State Health Plan changes could be good for state workers, bad for hospitals

State Treasurer Dale Folwell
State Treasurer Dale Folwell tlong@newsobserver.com

A fight over how hundreds of thousands of North Carolinians on the State Health Plan will pay for their health care and prescriptions has largely been brewing behind closed doors. But it erupted publicly Tuesday in a legislative committee meeting filled with angry accusations.

“I don’t think there’s anyone in the room who doesn’t realize we have a catastrophe on our hands,” said state Rep. Greg Murphy of Greenville, a Republican who led the meeting and is the only doctor in the state legislature.

He said that while “there are different ways to reach the same goal,” he was disappointed in the level of debate on display Tuesday. The battle over how, or whether, to change the State Health Plan is likely to consume significant attention at the legislature this year, and Murphy said he wants future debates to be “free from personal attacks, misleading information and scare tactics.”

Dale Folwell, a Republican in his third year as the State Treasurer, believes that hospitals are charging exorbitant rates to the more than 700,000 people who get their health insurance through the State Health Plan. He has proposed changing the way health care providers are paid whenever state employees and their families go in for a visit, which he says would save taxpayers more than $300 million a year, as well as an additional savings in out-of-pocket expenses for state employees on the plan.

“Every dollar that’s spent on health care unnecessarily is a dollar that can never be spent on education or public safety,” Folwell said. He placed a boot on the podium where he spoke, which he said represented state workers who “are not invisible to me.”

Hit to rural hospitals

The North Carolina Healthcare Association, which lobbies for state hospitals and other providers, opposes Folwell’s plan — which will go into effect Jan. 1, 2020, unless lawmakers act to stop it. NCHA officials said Tuesday the hundreds of millions of dollars at stake would equate to roughly a 15 percent average cut to the budgets of hospitals around the state. They said rural hospitals will face even greater financial challenges than they already do, if the changes go through.

“We had a hospital in rural North Carolina last week that closed its doors,” said Dr. Michael Waldrum, the CEO of Vidant Health, which operates hospitals and other health care businesses in a dozen Eastern North Carolina towns.

Six rural hospitals in North Carolina have closed since 2013, including three in the last two years, according to the Sheps Center for Health Services Research at UNC-Chapel Hill.

Waldrum said a large part of the reason rural hospitals are struggling is because they deal with more people who come in without any insurance. He said he has “a moral obligation to care for all the citizens who show up at our door, regardless of their ability to pay … and we can’t just look at one group, which this plan does.”

Terry Akin, the CEO of Greensboro-based Cone Health, raised his voice and said he was angry at Folwell for being “attacked, demonized and left out of the process.”

However, Folwell contended that some health care providers would actually make more money under the changes he’s proposing.

Robert Broome, the executive director of the State Employees Association of North Carolina, tweeted Tuesday that he wanted to speak at the meeting to defend the plan, which SEANC supports, but wasn’t given the chance. In a previous interview with The News & Observer, Broome said that “because of the lack of transparency in the State Health Plan, we have no way of knowing if State Health Plan members and other patients are paying their fair share.”

Folwell’s plan would bring more pricing transparency, and eliminate some of the flexibility in health-care pricing decisions, when people on the State Health Plan come in for treatment. It would create a system for treating state employees in which hospitals are reimbursed 177 percent, or nearly double, what Medicare would have paid for the same treatment.

“I would note that we are paying some providers 800 percent of Medicare today,” Folwell said.

Republican Sen. Joyce Krawiec of Kernersville praised Folwell’s plan.

“If we don’t have transparency, we are never going to get the cost on a downward curve for health care,” Krawiec said.

Is a compromise possible?

But Republican Rep. Josh Dobson, from McDowell County, said he fears that Folwell’s plan to save state employees money could end up backfiring, if it causes hospitals in rural areas like the western one he represents to leave the State Health Plan altogether.

“Many providers will not sign this contract,” Dobson said. “So state employees will have to drive further and pay more for care.”

However, he also said the current system might soon become unsustainable.

“I understand that by 2023, if we don’t do something, the State Health Plan will be in the red,” Dobson said.

Dobson wasn’t the only one to acknowledge that both sides had points in their favor.

“I think if you asked the people in this room if we agreed with both of you, we’d probably say yeah, we do,” said Republican Rep. Donny Lambeth of Winston-Salem, who is the former president of North Carolina Baptist Hospital. He said he thinks Folwell and the hospital representatives can reach a compromise, if they work together.

“What’s the downside of slowing this down, getting the two sides together?” Lambeth asked Tuesday.

Will Doran reports on North Carolina politics, with a focus on state employees and agencies. In 2016 he started The News & Observer’s fact-checking partnership, PolitiFact NC, and before that he reported on local governments around the Triangle. Contact him at wdoran@newsobserver.com or (919) 836-2858.