RALEIGH, N.C. — When Erin Williams-Reavis faced a $3,500 surgery bill, the hospital offered to let her pay in $300 monthly installments. It was too much, said Williams-Reavis, 44, who lives in Greensboro, about an hour west of the state capital. Her hours as a personal assistant had been cut, and she and her husband were behind on bills, even requesting a forbearance on their mortgage.
In Charlotte, Patrick Oliver was stunned to receive a nearly $30,000 bill after a trip to the emergency room for numbness and burning in his hands and feet. When Oliver, 66, and his wife, Mary, couldn't pay, the hospital sued them. The couple feared they'd lose their home.
In Asheville, Emmaleigh Argonauta's $25.72 medical bill was sent to collections. She said that she'd paid the bill but that the hospital system hadn't recorded it. It took Argonauta eight months, a slew of calls and emails, and a full day at the billing office to resolve the debt.
Now, they're all waiting to see whether North Carolina's lawmakers will make good on a bill that its sponsors say will "de-weaponize medical debt."
About 100 million people in the U.S. — 41% of adults — have some form of health care debt, according to a KFF poll conducted for a new KHN-NPR investigation. The problem is driving millions of people into bankruptcy, depleting savings and retirement accounts, and leaving black marks on credit scores that make finding housing or employment difficult, the investigation found.
But federal protections remain weak. And the widespread burden has spurred efforts by at least a dozen state legislatures in recent years to better protect patients. California, Maine, and Maryland have enacted measures that compel hospitals to expand financial aid, crack down on debt collectors, and curb extreme practices such as placing liens on patients' homes.
Many of these states have expanded Medicaid coverage through the Affordable Care Act, providing health insurance to millions of previously uninsured people.
But some states with the highest levels of medical debt, such as Texas, South Carolina, and Tennessee, have few protections. Low-income, Black, and Indigenous people in these Southern states are among the hardest hit. But even in more liberal states such as California, the health care and debt collection industries have foiled more ambitious reform efforts.
The debt problem in North Carolina is among the most acute in the nation, according to credit bureau data analyzed by the nonprofit Urban Institute. Only five states have a higher share of residents with medical debt on their credit reports.
North Carolina lawmakers are debating two measures to tackle the state's debt problem: one to expand Medicaid, a government insurance program for low-income people, and another to strengthen financial protections for patients. If both pass, policy experts say North Carolina could emerge as a national leader in protecting residents against medical debt and aggressive collection practices.
"Medical debt can drive people into poverty and prevent people and their families from getting out of poverty," said Mark Rukavina, a program director with the nonprofit health advocacy group Community Catalyst. These bills could provide "significant protection" against that.
Currently, North Carolina ranks 28th on a national scorecard of medical debt policies developed by the Innovation for Justice lab at the University of Arizona and the University of Utah. If North Carolina's legislature passes both bills, the state would jump to second, said Gabriela Elizondo-Craig, a lead investigator on the scorecard project. That would put it ahead of California and just below Maryland, which, according to the scorecard, is the only state that prohibits hospitals from selling medical debt to other companies.
The North Carolina Senate passed the bill that includes Medicaid expansion after Republicans, who had previously opposed the move, threw their support behind it. Senate leader Phil Berger said in a news conference that an increase in federal funds to encourage states to expand the program, along with a recent overhaul of the state's Medicaid program to make it more efficient, ensured that doing so would no longer hurt the state's budget. Although the bill faces an uphill battle in the House, it could provide insurance coverage to more than 500,000 people.
"Medicaid expansion would go beyond hospital costs," said Jenifer Bosco, an attorney at the National Consumer Law Center who has co-authored a model state law on medical debt. "It would touch all health care costs and pharmacy costs, which really does have the potential to reduce or eliminate a lot of medical debt for the lowest-income people."
The second piece of legislation, known as the Medical Debt De-Weaponization Act, would require hospitals to offer financial assistance to patients based on their income and limit the way large medical facilities and debt collectors can pursue unpaid bills. It features a host of provisions championed by consumer advocates, including the following:
- Require hospitals to provide free care to patients whose household income is at or below 200% of
- Require hospitals to offer patients payment plans that span at least two years, with installments that don't exceed 5% of their monthly income
- Cap the annual out-of-pocket expense for most patients at $2,300
- Cap the maximum interest rate on medical debt at 5%
- Shield family members from medical or nursing home debt incurred by a spouse or parent
- Delay reporting of unpaid medical debts to credit bureaus until one year after a patient is billed
- Prohibit home foreclosures related to medical debt
- Require the attorney general to enforce the law and giving patients the ability to sue health care facilities for violations
At least a dozen states have passed laws with similar provisions in recent years, said Quynh Chi Nguyen, a senior policy analyst at Community Catalyst. As of 2021, 10 states — including California, Illinois, and Maine — required hospitals to provide free or discounted care to patients who meet certain income thresholds. Thirteen states and Washington, D.C., limit various debt collection practices. In New Mexico, hospitals are prohibited from suing patients with incomes below 200% of the federal poverty level, placing liens on their property, or garnishing their wages. In Nevada, debt collection agencies are required to provide written notice to patients at least 60 days before any collection action is taken. Other state policies have focused on price transparency or limiting the impact of debt on people's credit scores and livelihoods.
Earlier this year, the three big credit-reporting agencies announced they will remove medical debts of less than $500 and those that have been repaid from consumer credit reports. The Biden administration advised federal lenders to no longer consider medical debt when evaluating loan applications.
Together, these policies can decrease the number of people driven into poverty by medical bills or kept there generation after generation because of medical debt, Nguyen said.
North Carolina's medical debt legislation was spurred by multiplereports from the treasurer's office, which found that hospitals sent nearly $150 million in bills to patients who should have qualified for free or discounted care under the hospitals' policies. A previous KHN investigation found similar trends nationwide.
"People in North Carolina are not able to see themselves out of poverty, not because of the war in Ukraine or inflation," said state Treasurer Dale Folwell, "but because of medical debt."
State Rep. Ed Goodwin, a Republican who sponsored the bill and represents two of the North Carolina counties with among the highest shares of residents with medical debt, said he believes there is bipartisan support to tackle the issue. Goodwin suggested that perhaps this bill will be easier to sell than Medicaid expansion — which he said has been discussed for years "and not a whole lot has happened."
But that doesn't mean it'll be smooth sailing.
At a committee hearing in early June, Republican state Rep. John Szoka said "a number of things" in the bill "greatly disturb" him. He questioned whether a credit score could substantially harm someone's upward mobility and noted that federal laws already require nonprofit hospitals to provide financial assistance. "I would not want to see any hospital turned into social services," he added.
Similar laws in other states have faced opposition from powerful hospital associations, and groups representing debt collectors often criticize these types of protections.
The North Carolina Healthcare Association, which represents hospitals in the state, said it has not taken an official position yet. But spokesperson Cynthia Charles said existing federal and state laws address many issues related to fair billing and collections.
Hospitals do "more than any other part of the health care field to assist vulnerable patients," she wrote in a statement to KHN. They try to make it easy for patients to learn about financial assistance through counselors, call centers, virtual chat tools, and more, she said, but it's "a two-way process," and patients must provide financial information to be qualified.
The North Carolina Collectors Association declined to comment.
For people with onerous medical bills, the legislation can't come fast enough and can't go far enough.
Emmaleigh Argonauta, who was sent to collections over that erroneous $26 bill, said the law should also require hospitals to provide an itemized bill to every patient, without waiting for them to request it.
Patrick and Mary Oliver, who were sued by a hospital, said health systems need to be clearer about the cost of services upfront and justify those costs.
Erin Williams-Reavis, who was offered the $300 monthly payment plan for her surgery bill, said lawmakers should speak with more "normal people" when revising the legislation "because we're the ones who are affected."
The medical debt bill is currently under review by the House banking committee, where it is likely to be revised. To pass into law this session, the bill has just two weeks left to make it through the North Carolina House and Senate.
KHN senior correspondent Noam N. Levey contributed to this report.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. It is an editorially independent operating program of KFF (Kaiser Family Foundation).