The Internal Revenue Service (IRS) has completed final regulations that will impose a cap on how much charitable hospitals can charge needy uninsured and underinsured patients for emergency services and medically necessary services.
The IRS developed the regulations to implement a section of the Patient Protection and Affordable Care Act (PPACA) that requires hospitals to stop charging uninsured people more than they charge people with health coverage.
The heart of the new system will be calculations of “amounts generally billed” (AGB) to patients who have health coverage. When a charitable hospital that wants to keep charitable hospital tax breaks treats a patient who needs financial assistance, the hospital will have to hold charges for emergency and medically necessary services to the AGB limit.
The new final regulations are based on draft regulations released in 2012 and batches of guidance issued earlier.
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Originally, IRS officials proposed letting a hospital calculate its AGB level by looking back at actual past claims paid to the hospital either by traditional Medicare alone or by Medicare and all private health insurers. A hospital could also base the AGB level on how much it would expect to get paid by traditional Medicare. Hospitals said that approach was too rigid. The IRS has not eased up, but it says it has given itself the flexibility to come up with different AGB calculation methods later, in guidance.