NC House Passes Bill Tying State Treasurer’s Hands on State Health Plan Pricing Reforms

RALEIGH – Republican State Treasurer Dale Folwell has lived up to his reputation as hard-nosed reformer during his 2+ years at the helm of Old North State’s finances. He has slashed investment fees paid by the state pension by millions and streamlined the administrative bureaucracy that handles those pensions and the State Health Plan. But when Folwell moved to save taxpayers millions more by reforming the pricing model used by the State Health Plan, the largest buyer of healthcare in North Carolina, he went too far.

At least, that was the apparent view by the powerful hospital lobby and the state lawmakers they hold influence over. In response to Folwell’s effort to bring transparency to the pricing model for the plan, lawmakers filed House Bill 184, and it passed the N.C. House with a strong majority on Wednesday.

This has grassroots conservatives who back Folwell’s cost-cutting initiatives quite upset, as they view it as a strong-armed tactic, used at the behest of the hospital lobby, to tie the hands of Folwell. These activists don’t take kindly to special interests carrying favor with politicians at the expense of taxpayers.

From Eastern North Carolina Tea Party leader Diane Rufino:

“[…] For the entire period that the Committee is given to study and recommend a plan, Folwell’s plan to reduce costs and save money is PUT ON HOLD and participating hospitals and healthcare institutions/physicians will continue to be reimbursed at 100% of the costs they submitted to the state.

The “Study” (Committee Study) is merely a guise and a delay tactic for the hospitals to continue billing and being re-imbursed as they have been. As Dan Way’s article (“Treasurer, Hospitals at Loggerheads Over State Health Plan Reforms”) in the Carolina Journal makes clear, some of the bills submitted by the hospitals (who how are seeking legislative power over the State Treasurer — talk about self-interest!) are 800% above ordinary costs. This bill is as PRO-HOSPITAL (and anti-State Employee and state taxpayer) as it gets. […]”

Ruffling feathers further, originally the Treasurer was not even included as a voting member on the committee the legislation creates to explore the issue. Luckily, a motion was made (and passed) to make Treasurer Folwell a voting member of the committee.

The balancing act between taxpayer savings and economic pricing models for the State Health Plan and the healthcare providers that treat those patients is tricky to be sure. However, it certainly doesn’t look good when a powerful special interest group is able to slam the brakes on honest efforts by a public servant to reign in our out of control and unfunded liabilities, which is his fiduciary duty to the citizens of this state.

Folwell’s office has been warning just how much the special interest interference will cost taxpayers. From a press release (emphasis added):

“The Fiscal Research Division (FRD) of the North Carolina General Assembly issued a “Legislative Actuarial Note” on the impact HB 184 would have on taxpayers and members of the State Health Plan (Plan). Its analysis of the actuarial impact of HB 184 estimates that the bill could cost taxpayers between $429–$591 million over the next three years based on projections from the actuarial-analysis firms Segal Company and Hartman and Associates.

Additionally, the analysis also notes that the bill adds $1.1 billion to the state’s unfunded liability for “other post-employment benefits” (OPEB) currently at $33 billion. This additional liability will negatively impact the state’s ability to maintain its triple, “AAA” bond rating further restricting the state’s borrowing capacity.  In fact, investor Warren Buffett recently warned that companies wanting to relocate should avoid states with high OPEB liabilities. […]”

Again, not a good look for a legislative majority elected to employ fiscal responsibility to be essentially ignoring mounting fiscal threats, let alone making them worse.

The support of the bill comes from providers concerned that the pricing changes will endanger hospitals’ bottom lines, threatening those on already thin financial ice with closure. Should taxpayers be the ones to ensure hospitals stay in the black?

The bill now heads to the state senate where it will be subject to more debate. If lawmakers are serious about reducing costs to taxpayers and relieving dangerous unfunded liabilities, at some point they will have to address the costs of the State Health Plan, whether it be on the front end, or back end.

You can follow House Bill 184 as it heads to the senate here.