By Mark Tosczak, with reporting by Rose Hoban

State Treasurer Dale Folwell wants to cut spending on state employee health care by tying fees the State Health Plan pays to Medicare rates.

When he announced the plan in late October, groups representing hospitals and physicians protested, saying it would strip millions of dollars in revenues that help support important but costly services at rural hospitals across the state.

And the North Carolina Healthcare Association, which represents hospitals, vowed it would take its objections to state legislators.

State Treasurer Dale Folwell. Photo courtesy: Folwell’s campaign Facebook page

It appears that’s now happened.

A draft bill floating around the Legislature would prevent the State Health Plan from making any changes to the way it reimburses providers through the end of 2021 — stalling the Medicare-based reimbursement system for at least two years.

The bill would also form a legislative study committee to examine ways to “ensure the fiscal sustainability” of the State Health Plan, which provides health insurance for more than 700,000 teachers and state employees, their families and state retirees.

As of Thursday, the bill hadn’t been introduced. And remarks by a key legislative leader suggest the bill may not stand much of a chance of being passed even if it is introduced. But it has attracted at least one sponsor in the House, Republican Josh Dobson (Nebo), who represents Avery, McDowell and Mitchell counties in western North Carolina.

“I have concerns with the approach that’s being taken,” Dobson said. “I think that the reductions to the provider community — $900 million over three years — is problematic.”

Folwell — also a Republican — said he started hearing last week about the possibility of a bill that could slow down or stop his efforts to cut costs from the State Health Plan.

“It prevents us from trying to save $300 million for the taxpayers and another $60 million for state employees every year,” he said.

“We believe the treasurer is not being transparent about what this proposal will do to state health plan members and their families,” Steve Lawler, president of the North Carolina Healthcare Association, said in a statement Tuesday. “He is busy making promises about premiums, but neglecting to address specifics about the provider network and access issues, and the fact that it does nothing to help individuals and families meet their healthcare objectives.”

Governmental payers such as Medicare and Medicaid both pay less than what it costs to provide care, hospitals argue, so they often depend on commercial payers, such as the State Health Plan, to pay a little more and make up the difference.

Hospitals also face some financial uncertainty in the short term. There are questions about hospitals’ payments under the new Medicaid transformation plan. And if the legislature were to greenlight expansion of Medicaid, lawmakers are looking to the hospitals to foot any extra costs to the state incurred by covering several hundred thousand new beneficiaries.

Dobson said he’s concerned about the impact the spending cuts could have on rural hospitals. Charles A. Cannon Jr. Memorial Hospital in Avery County, for example, could lose up to $4 million, Dobson said.

Rep. Josh Dobson (R-Nebo) headshot
Rep. Josh Dobson (R-Nebo) Photo courtesy NCGA

“Rural hospitals are on the margins,” he said. “There would be some that would stand to lose in this, and I’ve made no secret that part of my role down here that I see is to protect rural health care.”

Under the new reimbursement system, some rural hospitals — those the federal government designates as critical access hospitals — could get slightly higher reimbursements than they do now. But most rural hospitals are not critical access facilities and wouldn’t be eligible for those higher rates.

Robert Broome, executive director of the State Employees Association of North Carolina, said his group supports Folwell’s efforts.

“I cannot fathom why anyone, Republican or Democrat, would want to get in the way of saving taxpayer dollars and putting money back in the pockets of state employees, retirees and teachers,” he said.

Broome’s lobbyist, Ardis Watkins, said SEANC was not surprised to hear about opposition to Folwell’s plan.

“The state has been subsidizing rural and charity health care with the State Health Plan,” she said, according to the organization’s Twitter account. “We don’t expect hospital to operate at a loss, but the State Health Plan isn’t the vehicle to do that.”

But it’s too soon to say whether the bill will, in fact, slow down a plan that was approved unanimously by the State Health Plan board of trustees in October.

The legislative session that opened this week will be the last time Republicans hold a veto proof supermajority at the General Assembly for at least two years. Though the GOP will still be in charge on Jones Street, enough Democrats won seats in this month’s election to potentially prevent the Legislature from overturning vetoes by Democratic Gov. Roy Cooper. Some Democrats have said privately they support the bill, so it could make a reappearance after the new legislature is seated in January.

At the top of the GOP agenda this week and next is passing legislation to enact voter ID. What other issues that House and Senate leaders will be willing to take up — and that members will act on — still remains to be seen.

State Sen. Phil Berger (R-Eden), the president pro tempore of the Senate, told WUNC radio on Thursday he wasn’t ready to take up the legislation, even if it it did pass the House first.

“I think at this point there are some disagreements amongst providers as to how the treasurer is managing that plan,” Berger said. “I think that needs to work its way out and I don’t know if we necessarily need to jump into that at this point.”

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Mark Tosczak has worked as a writer and communications professional for more than 20 years, including stints as a newspaper reporter and editor, think tank communications director, marketing agency vice...