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By Rose Hoban and Taylor Knopf

In the highest profile faceoff thus far in this year’s legislative session, lawmakers acted both as referees and sometimes participants in a war of words between leaders from the state’s hospital industry and state Treasurer Dale Folwell at the General Assembly on Tuesday.

Dr. Roxie Wells, president of two small hospitals in the Cape Fear Valley Health System testifies before a joint House and Senate committee on Tuesday. She said Medicare and Medicaid, which pay less than commercial health insurance, pay for about seven in ten of the patients at her two facilities. All told she said she has about 6,300 people on the plan out of the 90,000 who are served by her hospitals. Photo credit: Rose Hoban

During a joint House and Senate meeting of health care committees, Folwell expressed his frustrations with what he called the high prices and lack of transparency from the hospital systems of North Carolina.

Hospital leaders, for their part, asserted that Folwell’s plan to peg payments to Medicare prices would be “devastating” to their institutions.

“This will hurt Cone Health to the tune of $26 million,” said Cone CEO Terry Akin, his voice starting to shake with anger. “It will hurt our health systems across the state to the tune of $400 million.”

For the past few months, Folwell has been touting his plan as a way to reduce the price burden on the state employees’ health plan, the insurance program that covers some 750,000 state employees, retirees and their family members. Since 2012, the state Treasurer’s office has been managing the State Health Plan.

And since late last year, there have been various bills floating around the General Assembly that would arrest Folwell’s plans or at least slow him down as he looks to cut the cost of state employee insurance.

“When you hear about the condition of the State Health Plan and what’s been going on for decades, I think you’ll be upset,” Folwell told legislators.

Tuesday was the first time that all of the players were in the same room in months. Instead, a war of words has escalated primarily on the opinion pages of newspapers around the state.

Unfunded liabilities

Since being elected in 2016, Folwell has made a point of talking about the state’s unfunded liabilities for health benefits the state has promised to employees and retirees, noting that the legislature has failed for decades to appropriate funds to cover those costs. He reiterated that point Tuesday while describing a bleak landscape of rising health care costs and hidden costs within the health care system.

State Treasurer Dale Folwell and State Health Plan Executive Director Dee Jones listen to the debate about future funding of the insurance plan that covers some 750,000 state employees, retires and their family members. Photo credit: Rose Hoban

“The unfunded liabilities of North Carolina, with the pension and health care, are nearly nine times the state debt of North Carolina,” Folwell claimed. “On the health care side, that puts us at $30 billion.”

He said he doesn’t know how much the state should be paying for health care of state employees, and that when he’s asked for pricing data, no one has been willing or able to deliver it. As he often does, Folwell arrived with props to make his point, including a thick sheaf of papers with large swaths of black where the print should be. He said this was the result of a request his office made to UNC Health Care to get a price list.

“You can’t cut the price of anything if you don’t know how much it costs to begin with,” he said.

Eventually, Folwell unilaterally decided he would cut $300 million in spending from the State Health Plan’s annual $3 billion budget by changing the reimbursement rates for hospitals, primary care providers and others. He says some, such as mental health practitioners, primary care providers and some critical access rural hospitals, would receive more, while others would receive less.

Some physician groups support him, as well as the State Employees Association of NC.

He said he wanted to “push the power out to the state employees and retirees so that they can consume health care the way they consume everything else in this state.”

“Disruptive”

The North Carolina Healthcare Association, which represents the state’s hospitals, opposes Folwell’s plan.

Vidant Health CEO Michael Waldrum, who spoke on behalf of the association, said he’s concerned about changes to Medicaid and the proposed SHP cuts happening simultaneously.

“We hope that Medicaid transformation goes well,” he said. “But if you follow the literature, it’s going to be very disruptive to providing health care.”

Duke Health Raleigh President David Zaas was one of a number of hospital CEOs who came to the General Assembly to testify Tuesday in opposition to State Treasurer Dale Folwell’s plan to peg payment to hospitals to the rates set by Medicare. Photo credit: Rose Hoban

Waldrum argued that the treasurer’s plan will reduce access to care and cause hospital closures, particularly in rural areas as providers who are losing revenue stop contracting with the SHP.

Rep. Josh Dobson (R- Nebo) said that under Folwell’s plan, providers would be asked to provide the same work and level of care for 15 percent less. Dobson has drafted at least one bill that would force Folwell to slow down his plans.

At times growing audibly frustrated, Dobson said that providers who do not sign onto the treasurer’s plan will no longer accept state employee insurance, and state employees will have to drive further for care.

“The very hard working state employees we are trying to protect will be harmed the most,” he said.

Instead, lawmakers and hospital leaders argued the treasurer should give providers the time to transition payment models to so-called value-based care. That’s a system where providers take on some of the risks of delivering care and receive some financial rewards for keeping patients healthy, instead of simply getting paid every time they do a procedure.

“I agree that we need to thoughtfully and carefully make health care more affordable,” Akin said. “But there is a right way and a wrong way to do it.”

Compromise sought

Tuesday’s hearing was lead by Greenville Republican Rep. Greg Murphy, who started by noting he had competing interests: as a physician who practices at Vidant Hospital and cares for many who are unable to pay, as a legislator tasked with securing the public purse and as the owner of a busy medical practice with 50 employees who struggles to provide them with health insurance.

State Treasurer Dale Folwell speaks to Durham Rep. Mary Anne Black (D) after Tuesday’s joint health care committee hearing. Photo credit: Taylor Knopf

Murphy said that health care in the state and the country “has to be fixed. But in my opinion, it can only be fixed by everyone coming to the table with their different areas of expertise, listening, communicating and understanding so we can move forward together.”

Sen. Don Davis (D-Greenville) said he was disappointed in the tone of the debate, both during the hearing and in prior weeks and months. He said that the problem has been exacerbated by decades of the legislature inaction and noted the issue would not be solved overnight.

Then, Davis joined the chorus of lawmakers asking Folwell to compromise or slow down his timeline, which calls for implementation in January 2020.

Folwell said he was unwilling to change course, but he noted his office was making “tweaks” that would be unveiled in coming weeks.

“We have to proceed,” he said.

He added that he has “white coats” ready to sign his contracts this summer and that others would be more vocally supportive of his plan if they weren’t “scared” of the healthcare association.

“The only way we will slow down is if someone files legislation to do so,” Folwell said. “Any bill like that would reduce transparency and drive up costs.”

After Tuesday’s meeting, such a bill seems likely to appear.

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Taylor Knopf

Taylor Knopf writes about mental health, including addiction and harm reduction. She lives in Raleigh and previously wrote for The News & Observer. Knopf has a bachelor's degree in sociology with a...