N.C. eliminates $6.5B in medical debt with hospital incentive program
By Dave Muoio / October 14, 2025
A North Carolina program incentivizing hospitals to relieve patients’ medical debts has cut more than $6.5 billion in accrued debts for more than 2.5 million people since launching last summer.
The Medical Debt Relief Program, a collaboration between the North Carolina Department of Health and Human Services (DHHS), the nonprofit Undue Medical Debt and 99 acute care hospitals in the state, surpassed the $4 billion goal outlined by former Gov. Roy Cooper last July. It also brought a slew of new charity care commitments for participating hospitals intended to mitigate the accumulation of new debts.
“Medical debt delays access to care and easing debt is a pivotal step forward to improving the health and well-being of those who carry the emotional stress and financial weight of high costs for medical care,” North Carolina DHHS Secretary Dev Sangvai, M.D., said in a Monday announcement. “We are grateful to the hospitals and providers who are helping to give a fresh start to millions of North Carolinians.”
Residents across the state are receiving letters from individual hospitals as well as from Undue Medical Debt informing them of the relieved debt, the state said. At least 255,000 letters are being sent this week “with more to come in the following months and years,” according to the Monday announcement. The letters inform recipients that there is no action needed on their part to receive the relief.
In a press event held Monday, current Gov. Josh Stein said the recipients of these letters will see debt relief of about $2,600 on average.
The initiative, with the Centers for Medicare & Medicaid Services’ blessing, outlined a slew of charity care conditions that allowed participating hospitals to receive increased payments through North Carolina’s state directed payment program.
To do so, the hospitals each agreed to relieve all medical debt deemed uncollectible dating as far back as Jan. 1, 2014, for anyone enrolled in Medicaid. These debts also needed to be forgiven for anyone not enrolled Medicaid with an income at or below 350% of the federal poverty level or for whom the total debt exceeded 5% of their annual income.
Further, the hospitals agreed to discount medical bills by 50% to 100% for patients with incomes at or below 300% of the federal poverty level; to conduct presumptive screening for and automatic enrollment into financial assistance; to not sell to debt collectors any medical debt for those with incomes at or below 300% of the federal poverty level; and to not report any patient debt covered by the policies to a credit reporting agency.
Every eligible hospital in the state agreed to participate in the Medical Debt Relief Program. The North Carolina DHHS’s website hosts a running list of the aggregate amount of debt relieved or donated by each organization, which for some exceeds $300 million.
The $6.5 billion tally announced Monday includes debt forgiven directly through the program as well as additional debt relief stemming from hospitals’ updated policies. Due to the program’s reliance on state-directed Medicaid payments from the federal government, no state funds were used in the program. Sangvai told press Monday that no immediate changes to the debt relief program will come as a result of federal legislation passed this summer imposing new limits on state-directed payments.
“Medical debt is a tremendous weight keeping so many families from financial security, and, unlike most other forms of debt, it’s not a choice,” Stein said in a Monday statement. “Today’s announcement will free people from financial stress so they can focus on getting healthy. I thank Governor Roy Cooper, DHHS Secretary Kody Kinsley, and the hospitals that partnered with the State of North Carolina to make this life-changing news possible.”
In Monday’s announcement and press conference, state officials said medical debt brings negative impacts on individuals’ well-being, access to credit and willingness to seek needed care. Those harms have been outlined in academic research on the issue, though a high-profile 2024 study of Undue Medical Debt (then RIP Medical Debt) threw some cold water on the claims that purchasing medical debt for the purpose of forgiveness brings immediate relief to debtors.
The nonprofit said at the time that it’s since made adjustments to its debt relief practices addressing some of that paper’s criticisms, and this week applauded the North Carolina program as a nondisruptive approach to relieving patients’ burdens.
“We’re honored to play a part in this innovative approach to erasing unpayable medical debts while also incentivizing upstream, pro-patient policies,” Undue Medical Debt CEO and President Allison Sesso said in a statement. “These changes will protect against financially and emotionally burdensome medical debts in the future while also ensuring our vital hospital partners are financially secure. … We are hopeful this collaboration serves as a model for others, and we look forward to making care more accessible for North Carolina families by erasing these debts of necessity.”