The outgoing chairman of the House Ways and Means Committee says tax-exempt hospitals should earn their tax breaks.
Rep. William Thomas, R-Calif., has introduced H.R. 6420, the Tax Exempt Hospital Responsibility Act, a bill that would limit nonprofit hospitals to charging $25 per medically necessary visit for uninsured individuals with annual household incomes up to 100% of the federal poverty level for that individual’s area.
A hospital that violates the rule might have to pay a tax of $1,000 for each violation, according to the bill text.
For individuals in households with incomes of 100% to 200% of the federal poverty level, a nonprofit hospital would have to limit care to the average amount paid to the hospital under carriers with private health insurers.
Under current law, a nonprofit hospital must meet a “community benefit standard” to qualify for a tax exemption, but the hospital does not have to provide a minimum level of charity care, Thomas says.
“This legislation would create a more level playing field among hospitals,” Thomas says in a statement about the proposed bill.
Thomas says he hopes the bill will help start conversations about nonprofit hospital charity care in the next Congress.
Thomas and other lawmakers have been looking at topics such as charity care at nonprofit hospitals and the high prices that hospitals often charge uninsured patients for several years.
Researchers at the Congressional Budget Office recently looked at hospital “uncompensated care” data for hospitals in California, Florida, Georgia, Indiana and Texas to analyze differences between the care provided at nonprofit and for-profit hospitals.
The CBO researchers found that uncompensated care accounted for an average of 4.2% of care provided in 2003 at the for-profit hospitals studied; 4.7% at the nonprofit hospitals; and 13% at the hospitals owned by state and local governments.
Uncompensated care accounted for 20% to 30% of care at significant numbers of the hospitals owned by state and local governments, but almost none of the for-profit or nonprofit private hospitals reported that uncompensated care constituted more than 10% of the care they provided, the CBO researchers write in a discussion of their analysis.
The CBO researchers checked to see whether the nonprofit hospitals were more likely than the for-profit hospitals to be in troubled communities.
“It appears that nonprofit hospitals tend to be found in areas with relatively high income, low poverty rates and low rates of uninsurance,” the researchers write.
One limitation of the study is that the term “uncompensated care” can include bad debt as well as true charity care, the researchers note.
But another limitation is that figures on uncompensated care are readily available only in the 5 states included in the study, the researchers write.
Meanwhile, figures from the congressional Joint Committee on Taxation show that tax exemptions save nonprofit hospitals more than $12 billion per year, the researchers observe.
But officials at the American Hospital Association, Chicago, say efforts to compare the effects of tax breaks with raw uncompensated care data are misleading.
“Over the centuries, hospitals have evolved from custodial institutions for unwanted members of society, particularly the poor, to dynamic organizations that reach beyond their walls to target and address the needs of the entire community,” Kevin Lofton, a representative for the AHA, testified before the U.S. Senate Finance Committee in September, according to a written version of his remarks.
In the United States, “early standards for tax-exempt hospitals focused solely on care for the poor,” but now courts and others use a broader concept of what constitutes “charitable obligations,” Lofton said.
“Since 1969, not-for-profit hospitals have been able to fulfill their charitable obligations through an appropriate mix of charity care, financial assistance to low-income patients, subsidized health care, research, health professions education and other community-building activities that are tailored to the needs of the communities they serve,” Lofton said.
A copy of the Thomas bill is at Document Link
A copy of the CBO report is at Document Link
Links to a copy of Lofton’s testimony and other statements about nonprofit hospitals are on the Web at Document Link