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Editorial: Hospitals must prove they deserve charity status
The Register's editorial 11:11 p.m. CDT July 6, 2015
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Washington lawmakers do not agree on which taxes to raise or cut. They should be able to agree that anyone granted tax-exempt status must earn it by providing a specific, measurable benefit to the public. Then they should update antiquated federal law to reflect that.
The more than 1.5 million nonprofit organizations in this country deprive the government of revenue, contribute to deficits and force other taxpayers to compensate by contributing more. Yet it is frequently not clear what the rest of us receive in return.
The first entity Congress should scrutinize: hospitals.
A study published in a June issue of Health Affairs estimates the total value of the tax exemption for nonprofit hospitals was about $25 billion in 2011. Yes, billion with a “b.” That is about double the amount in lost government revenue for these hospitals a decade earlier and more than three times the annual budget for the entire state of Iowa.
Like businesses, hospitals are paid for the services they provide. Any insurer or individual who has received one of their bills knows how much they charge. Unlike businesses, hospitals are considered “charities” by Uncle Sam and receive preferential tax treatment, which costs federal, state and local governments a fortune.
When the tax code pertaining to hospitals was crafted decades ago, the facilities were mostly smaller religious or community institutions operating on shoestring budgets in a country where many Americans paid their own medical bills. Today hospitals are frequently part of large networks, pay huge CEO salaries and employ teams of people to collect revenue. They may hold tens of millions of dollars in reserves and open lavish, unnecessary facilities in the suburbs.
Yet the government does not require these charities to provide a single penny in charity care. Washington does not specify how much “community benefit” they must provide. Only 8 percent of hospital spending on that nebulous benefit is for community health improvements, according to estimates from the Internal Revenue Service. The largest share of this spending is used to offset Medicaid shortfalls, according to hospitals. In other words, they pay themselves back for the government insurance program not paying them enough.
And some of them do not behave very charitably.
Several years ago, Sen. Chuck Grassley spearheaded an investigation that found some of these tax-exempt organizations were paying the cost of country club memberships for top officials and hounding the poor to pay bills. Several months ago he sent a letter to a Missouri hospital that was garnishing wages of low-income workers with medical debt.
While Grassley’s office has perfected the art of issuing press releases reflecting the senator’s frustration, he and the rest of Congress have accomplished nothing of substance on this issue. (A provision co-authored by Grassley in the Affordable Care Act required hospitals to make “reasonable efforts” to determine whether patients qualify for aid before taking aggressive steps to collect money. Of course “reasonable” is in the eye of the beholder, and Grassley didn’t vote for the final legislation, which contained the provision.)
Washington lawmakers should finally require nonprofit hospitals to meet clear, meaningful standards ensuring their community benefit is commensurate to what they cost the public. Congress should require a minimum percentage of their spending be directed to defined charity care. There should be caps on what top officials can be paid, and hospitals should be prohibited from harassing the poor, who simply cannot pay huge medical bills.
Any entity enjoying the tax perks of a charity should be required to act like a charity.
The Register's editorial 11:11 p.m. CDT July 6, 2015
TWEETLINKEDIN 2 COMMENTEMAILMORE
Washington lawmakers do not agree on which taxes to raise or cut. They should be able to agree that anyone granted tax-exempt status must earn it by providing a specific, measurable benefit to the public. Then they should update antiquated federal law to reflect that.
The more than 1.5 million nonprofit organizations in this country deprive the government of revenue, contribute to deficits and force other taxpayers to compensate by contributing more. Yet it is frequently not clear what the rest of us receive in return.
The first entity Congress should scrutinize: hospitals.
A study published in a June issue of Health Affairs estimates the total value of the tax exemption for nonprofit hospitals was about $25 billion in 2011. Yes, billion with a “b.” That is about double the amount in lost government revenue for these hospitals a decade earlier and more than three times the annual budget for the entire state of Iowa.
Like businesses, hospitals are paid for the services they provide. Any insurer or individual who has received one of their bills knows how much they charge. Unlike businesses, hospitals are considered “charities” by Uncle Sam and receive preferential tax treatment, which costs federal, state and local governments a fortune.
When the tax code pertaining to hospitals was crafted decades ago, the facilities were mostly smaller religious or community institutions operating on shoestring budgets in a country where many Americans paid their own medical bills. Today hospitals are frequently part of large networks, pay huge CEO salaries and employ teams of people to collect revenue. They may hold tens of millions of dollars in reserves and open lavish, unnecessary facilities in the suburbs.
Yet the government does not require these charities to provide a single penny in charity care. Washington does not specify how much “community benefit” they must provide. Only 8 percent of hospital spending on that nebulous benefit is for community health improvements, according to estimates from the Internal Revenue Service. The largest share of this spending is used to offset Medicaid shortfalls, according to hospitals. In other words, they pay themselves back for the government insurance program not paying them enough.
And some of them do not behave very charitably.
Several years ago, Sen. Chuck Grassley spearheaded an investigation that found some of these tax-exempt organizations were paying the cost of country club memberships for top officials and hounding the poor to pay bills. Several months ago he sent a letter to a Missouri hospital that was garnishing wages of low-income workers with medical debt.
While Grassley’s office has perfected the art of issuing press releases reflecting the senator’s frustration, he and the rest of Congress have accomplished nothing of substance on this issue. (A provision co-authored by Grassley in the Affordable Care Act required hospitals to make “reasonable efforts” to determine whether patients qualify for aid before taking aggressive steps to collect money. Of course “reasonable” is in the eye of the beholder, and Grassley didn’t vote for the final legislation, which contained the provision.)
Washington lawmakers should finally require nonprofit hospitals to meet clear, meaningful standards ensuring their community benefit is commensurate to what they cost the public. Congress should require a minimum percentage of their spending be directed to defined charity care. There should be caps on what top officials can be paid, and hospitals should be prohibited from harassing the poor, who simply cannot pay huge medical bills.
Any entity enjoying the tax perks of a charity should be required to act like a charity.
