Artificial intelligence is supposed to make healthcare more efficient and affordable. Instead, lawmakers in North Carolina are increasingly concerned it may be quietly driving costs even higher — and sticking patients with the bill.
That concern took center stage during a hearing before the Senate Health Care Committee, where Sen. Amy Galey laid out legislation aimed at placing guardrails around the use of AI in medical billing, and restricting the use of AI for prior authorization claim denials.
The bill targets what experts describe as emerging evidence of AI-assisted “upcoding” — the practice of assigning more severe diagnoses or billing codes that can lead to higher reimbursement payments from insurers, taxpayers, and patients themselves.
Galey argued the technology is increasingly being used not simply to improve medical documentation, but to maximize billing.
“There is mounting evidence that hospitals are... using ambient AI also to listen for billing codes resulting in a higher bill that increases costs for insurers including Medicaid and the State Health Plan and the patient.”
The hearing highlighted how rapidly AI tools are being integrated into hospital billing systems and revenue cycle management. Some AI vendors now openly market their ability to help hospitals identify higher-severity diagnoses and increase coding intensity — practices that can generate significantly higher reimbursement payments.
Independent research presented during the hearing showed dramatic increases in diagnoses such as sepsis, anemia, and other high-cost conditions without corresponding increases in treatment intensity — raising serious questions about whether AI is inflating bills rather than improving care.
For Galey, it is an issue of affordability and consumer protection, particularly for working families already struggling under rising healthcare costs.
“A regular person who carries a high deductible or an uninsured person is not equipped to challenge a hospital for upcoding a diagnosis or procedure. That is why this bill is needed to protect individual people looking over their medical bills at the kitchen table trying to figure out why is my bill so high.”
She continued, “The bill also protects employers grappling with increasing healthcare costs and higher insurance costs for trying to provide benefits for their employees.”
Galey emphasized that healthcare providers and hospital systems face growing pressure to adopt revenue-maximizing AI tools if policymakers fail to act.
“It’s our duty to protect the patient. It’s our duty to look after our constituents who are struggling with this.”
For patients in North Carolina, the stakes are significant. The state ranks among the most expensive for healthcare and hospital prices remain one of the largest drivers of rising healthcare costs, impacting everything from employer-sponsored insurance premiums to family medical debt.
“People are really angry and frustrated. And I think this is one area that the General Assembly can take a look at the cost of healthcare and do something meaningful," Galey said.
As lawmakers continue debating the legislation, the hearing made one thing clear: concerns over AI-driven healthcare costs are no longer hypothetical. North Carolina legislators are beginning to confront whether artificial intelligence will be used to improve patient care — or simply become another tool for driving up the price of healthcare.
