North Carolina’s state pension plan and State Health Plan are facing uphill financial struggles, State Treasurer Dale Folwell said Tuesday.
At the monthly Council of State meeting, he said that his office recently performed a “stress test” to determine the pension plan’s future. For the first time, it showed that the pension plan has a 75% chance of hitting its assumed rate of return over the next 20 years, which, as Folwell explained, is the result of a few things.
“We’ve lowered the assumed rate of returns so that we’re less optimistic, and when you’re less optimistic, that means more money has to go into the plan,” Folwell told Council of State members. “When you see numbers like 2% or 3% (possible future earnings) that’s because that’s what the stress test was meant to do, to put it under stress to see how it would perform in a bad economic environment, which we’ve obviously had over the last couple of days as far as the stock market is concerned.”
He also said that fewer state employees are paying into the plan, and part of the reason is the employer contribution rate.
“It doesn’t mean that everybody who’s not paying in is retired and drawing a check,” Folwell stated. “What that means is we have several people who are invested in the plan but not yet old enough to draw money out of it, but that is an obligation. The plan gets its money from active employees, their employers contributing to the plan, both individually and as an agency.”
The State Health Plan is also under pressure, with a $106.3 million income loss for the 2023-24 fiscal year.
Folwell said during his monthly call with reporters Tuesday that the plan is on track to go below its statutory minimums by 2025, or as he said, “one pandemic away from not being able to pay our bills.”
In addition, he added that the unfunded liability, currently at $30 billion, continues to go up.
“It’s only about 9% funded now; it was 2% funded when I came on board,” Folwell said. “A part of how it’s calculated is based on the 10-year municipal bond rate. If healthcare costs continue to go up, if prescription drug costs continue to go up, and the amount of money that we continue to get from the General Assembly is not keeping pace with that inflation, nor are we being reimbursed for actual expenses for things like COVID related activities, you can see that’s going to be an issue.”
He added there wouldn’t be an issue if the General Assembly agreed to pass reference-based pricing, as far as what the state is paying for hospital costs, saving $300 million a year. Additionally, he said everything else going on with the state’s balance sheet is in great shape, except for the Department of Transportation’s debt and budget.
Folwell said the answer to fixing the state health plan isn’t raising family premiums when so many people are struggling with the inflationary economy. He said there is a simple five-point plan to solve this problem in the long term.
In addition to hospitals abiding by President Biden and President Trump’s executive order on price transparency, he said hospitals need to match their charity care.
“Not their retail charity care or some trumped-up number on charity care, but the actual charity care with the tax benefit they receive,” Folwell said. “Number three, stop breaking people’s kneecaps for not paying their bills. Number four, the General Assembly needs to repeal the con on the people of this state with Certificate of Need, and number five, these multi-millionaire hospital executives need to have the courage to show their contract and their compensation package, which I think will prove that their board of trustees are incentivized to put profits over patients and as long as the boards of trustees are not holding these CEO’s accountable and always putting profits over patients, it’s going to be very difficult to solve this problem.”
He also asked Gov. Roy Cooper to sign on to a letter that the State Health Plan sent to Washington, D.C., regarding the price of GLP-1 weight loss drugs like Wegovy and Ozempic. He said it only costs $75 to produce the drugs, but State Health Plan members were paying as much as $1300 a month for them. The letter would ask the drug manufacturers to release the compounding of the drugs so they could be provided generically.
During the reporters call, Folwell said he has asked the North Carolina Department of Health and Human Services how much they were paying for the drugs now that they are covering them through Medicaid, but had yet to receive an answer.
“We deserve to know what North Carolina DHHS is paying for this GLP-1 drug,” asserted Folwell.
Folwell also commented on the “cartel” of major hospitals in the state buying out some of the smaller hospitals, calling their billing practices, “immoral.”
“We all know the disaster that’s happened in western North Carolina over the last five years with HCA’s takeover of Mission Health,” he said. “When you saw somebody wearing a Mission Health outfit, that was a sign of pride. They were part of a community, they were part of a family, and now it’s just been a complete disaster, and I’m sorry that this has gotten into the political realm, but you know there’s only one person whose fingerprint is on that transaction. That’s the attorney general [Josh Stein] of this state and if you see what’s happened at Mission Health and HCA and see what’s happening with Novant taking over New Hanover Regional and how that is the combination of a hospital that came together in the mid-60s, this is happening all across the state.”
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