This overview is excerpted from Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments.

On July 1, North Carolina announced a new plan to relieve past medical debt for low- and middle-income consumers and mitigate the impact of medical debt going forward. Under the proposal, hospitals that choose to implement medical debt mitigation policies established by the state will be eligible for enhanced reimbursement through North Carolina’s Medicaid state directed payment (SDP) program.

Today, the medical debt burden for North Carolinians is among the highest in the country and disproportionately affects communities of color. One in four households of color in North Carolina have medical debt in collections, nearly twice the national average. Because medical debt disproportionately affects low-income adults without insurance, North Carolina’s initiative is likely to benefit many in the state who incurred medical debt in the past when they lacked access to coverage and became newly eligible for coverage with the state’s implementation of Medicaid expansion on December 1, 2023. Under North Carolina’s plan, hospitals participating in the program will forgive or donate medical debt retroactive to January 1, 2014, the first date on which states had the option to expand Medicaid under the Affordable Care Act.