New tax laws will not allow state agencies to collect patients’ tax returns in exchange for medical debts — in a time of rising health care costs and lack of Medicaid expansion.

The final version of the state’s omnibus tax reforms, passed last month, omitted an early provision that would have reenacted the Set-Off Debt Collection Act, also known as SODCA.

The original law was enacted in 1979 and repealed in 2013. It allowed state agencies to collect unpaid debt — including hospital patient debt — by seizing tax returns and lottery winnings.

Before the law was repealed, the East Carolina University Physicians Group and UNC Health Care together collected about $12.6 million from tax returns in 2011-2012, according to a legislative report.

But Adam Linker, a health care policy analyst at the N.C. Justice Center, said the policy was unfair to patients, who did not have to be notified before their tax returns were collected.

“I’m sympathetic to the health care providers to wanting to make up lost revenue and not wanting to get these kind of multimillion dollar cuts, but I think the money should be made up in other ways other than allowing them to engage in these aggressive collection practices,” he said.

When the provision was enacted in 1979, it had no statute of limitations on when the patient debt could be collected— the money taken from tax returns could be used to pay even decades’ old medical bills.

Needing more funds

But Nick Benson, vice dean of the Brody School of Medical Administration at ECU, said he thinks it is appropriate to use patients’ income tax refund to cover their medical debts,

“My general approach to paying my bills is that when somebody gives me a bill for a service that they have done...then my responsibility is to pay that bill,” he said. “I think the same thing applies in health care.”

He said the repeal of SODCA was a significant financial blow to ECU Physicians, which is a provision of the Brody School of Medicine.

Benson said the group lost at least tens of millions of dollars each year, which pinched the medical school’s academic work.

“The non-clinical part of the medical school relies on the clinical part to help fund expenses,” he said. “The clinical enterprise generates money that helps to cover teaching costs within the medical school.”

Benson said he encouraged state legislators to look more closely at health care costs, especially for academic medical institutions.

“It would be helpful for them — vital for them — to step back and take a closer look at (SODCA) and really understand how it affects the education of medical students, of doctors, to serve the people of North Carolina,” Benson said.

Lack of Medicaid Expansion

Benson said Medicaid expansion would help alleviate lost revenues.

North Carolina was one of 22 states who opted out of the Affordable Care Act, which would have expanded Medicaid coverage, last year.

ECU Physicians sees about 113,000 visits from uninsured patients each year — about 17 percent of all visits, Benson said.

“Through Medicaid expansion, more — not all, but more of those uninsured patients would be covered by Medicaid — and we would get more money for that to be able to provide care to the people and cover our academic costs,” he said.

And UNC Health Care provides more than $300 million in uncompensated care each year, said Jennifer James, a UNC Health Care spokeswoman in an email.

“With state support of Medicaid, our hospitals could certainly do more for the thousands of patients who depend on the program for necessary health services,” she said in the email.