North Carolina Treasurer’s Office Says Hospitals Reaping Billions from Medicare Despite Claiming Otherwise

Treasurer calls it 'biggest transfer of wealth in my lifetime'

The official U.S. Government Medicare Handbook for 2020 over pages of a Department of Health and Human Services, Office of the Inspector General report, are shown, in Washington on Feb. 13, 2020. Wayne Partlow/AP Photo

A report prepared for the North Carolina State Treasurer’s Office revealed that many state hospitals and lobbyists haven’t lost billions of dollars on Medicare patients as they previously claimed, but in fact made large profits from 2015 to 2020.

“What we’re seeing is the biggest transfer of wealth in my lifetime in North Carolina,” state Treasurer Dale Folwell said at a press conference on Oct. 25. “It’s a transfer of wealth especially from lower fixed-income people to these big multibillion-dollar corporations who disguise themselves as nonprofits.”

The research for the report (pdf) was conducted by the North Carolina State Health Plan (NCSHP) and Rice University’s Baker Institute for Public Policy.

Medicare losses are often the largest line item of community benefits cited by hospitals to justify tax exemptions, mergers, and price increases, a press release from NCHSP stated.

“North Carolina hospital lobbyists claimed they lost $3.1 billion on Medicare in 2020—the same year hospitals reaped $87 million in Medicare profits,” NCHSP stated.

The lobbyists’ loss claim was 3,670 percent larger than the hospitals’ self-reported Medicare profits, NCHSP stated.

On average, NCHSP said, North Carolina hospitals charge privately insured individuals 280 percent of Medicare, which forces patients and employers to pay thousands of dollars more for medical care.

According to the report, working Americans sacrifice 20 percent of their income to health care expenses, while almost 40 percent of Americans report cutting back on other expenses to pay those health care costs.

“Their burden is at risk of becoming far worse, as experts warn that crushing, double-digit health care price inflation could be on the horizon,” the report stated. “After decades of hospital consolidation and price increases, North Carolina now ranks among the least affordable and most monopolistic states in the nation for health care.”

One in five families is in collections for medical debt in the state, the report said, and local hospitals have sued more than 1,000 patients.

“Almost half of adults report delaying or skipping necessary medical care due to the costs,” the report stated. “Medical debt disproportionately hurts veterans, elderly adults, minorities, and low-income families.”

Hospitals have blamed rising medical costs on “cost-shifting,” defined as one group being overcharged for service because another group underpays.

Those who can’t pay, or go into hospital collections, are blamed by the hospitals for the rising costs of medical care. However, according to this new report, that isn’t the case.

A range of 55 to 66 percent of more than 100 hospitals profited off Medicare from 2015 through 2020 in North Carolina, the report stated.

“While many hospitals’ margins fluctuated, only 15 hospitals consistently lost money on Medicare, and 35 hospitals posted profits over all six years,” the report said.

This placed North Carolina in the top 10 states with the most profitable Medicare margins for five of those years, averaging between -0.3 percent and 2.5 percent Medicare margins, the report stated.

‘Hospital Cartel’

“This raises serious concerns over hospitals’ commitment to their patients and their charitable mission, and the steep costs passed on to nearly 740,000 members of the State Health Plan,” the state treasurer’s office said in a press release.

At the press conference, Folwell called for price relief from hospitals.

“The hospital cartel is overcharging you because they can, not because they need to,” Folwell said, adding that hospitals have been hiding behind Medicare, claiming huge losses to justify “kneecapping” their patients.

“This is the Wild West,” Folwell said. “Nobody’s watching it. Nobody’s holding them accountable. We need a commitment from the cartel to get back to their original mission and to stop putting profits over patients.”

‘Misinformation and Half-Truths’

The North Carolina Healthcare Association (NCHA) responded to the report, stating that it continues a pattern of “misinformation and half-truths” to make “inaccurate conclusions,” while stating that it “fails to account for the incredible complexity of our healthcare system, including health insurance companies’ role in rising costs, and does nothing to advance affordable, high-quality healthcare in our state.”

The NCHA maintains that North Carolina hospitals are operating in negative margins this year and that both Medicaid and Medicare reimburse hospitals for caring for patients below the actual costs of providing that care.

Despite this statement, many researchers have found that billions have poured into hospitals through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The CARES act created the Centers for Medicare and Medicaid reimbursement plan that allowed for hospitals that adhered to protocols for treating COVID-19 to reap up to $500,000 per patient, beginning with a positive COVID-19 test, the use of a National Institutes of Health-approved antiviral drug called remdesivir, putting the patient on a ventilator, and ending with the hospital listing COVID-19 as the cause of death on a death certificate.

According to a report from TN Liberty Network, an independent think tank comprising 28 researchers, hospitals have taken lucrative payoffs from the federal government throughout the last several years (pdf).

In addition to the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act provided another $178 billion in relief funds to health care providers and hospitals, with more relief funds siphoned to states from the American Rescue Plan Act beginning in March of 2021, $8.5 billion of which went to health care providers.

Still, NCHA argues that it’s seeing more hospital layoffs because of its financial situation.

“Our emergency departments are overcrowded with patients and running out of bed space,” NCHA said.

NCHA said that instead of using his platform to promote Medicaid expansion or address a “staggering mental health crisis,” Folwell has issued a report that failed to explain the health care crisis in the way that NCHA would.

“Instead of bringing transparency and clarity to the public, Treasurer Folwell has created an incomplete and complicated report that fails to address how he will provide more affordable healthcare to state employees and retirees,” NCHA said. “North Carolinians deserve truthful and transparent information. This report fails to deliver it.”