North Carolina tied Medicaid funds to hospitals erasing $6.5B in debt at no state cost

NPR reported in January 2026 that North Carolina's program wiped $6.5 billion of medical debt for 2.5 million people in 2025 without costing the state a dollar. The state persuaded all 99 hospitals to forgive debt dating back a decade. Former Secretary of Health Kody Kinsley organised it and enticed hospitals to cooperate by tying extra Medicaid dollars to participating.

Undue Medical Debt, which normally buys debts for pennies on the dollar and erases them, worked differently here: it worked with the hospitals to decide whose debt to eliminate, then sent people letters saying the debt was gone. One recipient, a nurse, had a $459 emergency-room bill for a 2014 visit wiped by the hospital where she worked.

Going forward, hospitals must give automatic discounts to patients, such as a family of four earning under $96,000 a year, instead of making patients ask. Kinsley said he shifted the responsibility to the hospitals because it should not be up to families to request help.

Medicaid payments give the state leverage over every participating hospital.

Hospitals write off old debt anyway, so forgiving it costs them little.

Letting a charity handle notification gets the message to patients.

Making discounts automatic stops new debts from building up.

If a payment stream already flows to the party holding the problem, attach conditions to it instead of paying separately to fix the outcome.

Other states have taken different routes: Arizona and New Jersey used state money to buy and forgive debt, Oregon and Illinois screen patients for aid, and Colorado and New York bar medical debt from credit reports. A Princeton expert said protections vary by ZIP code. The North Carolina Healthcare Association says expected Medicaid cuts could make sustaining the efforts harder.