Health

Non-profit hospital tax exemption up to $28 billion: KFF


A new analysis finds that nonprofit hospitals received $28 billion in taxpayer benefits in 2020 but provided only $16 billion in free or reduced-price care.

Hospitals have long argued that nonprofit service providers do more for their communities than can be adequately measured, and that their various investments go far beyond exemptions. federal and state income taxes, sales taxes, and property taxes. But the latest research from the Kaiser Family Foundation has bolstered arguments from many economists and healthcare policymakers that nonprofit hospitals are not exempt from tax.

“Taxpayers are subsidizing more,” said Ge Bai, a professor of accounting and health policy at Johns Hopkins University who studies charitable care spending by nonprofit hospitals but not participating. their fair share. analysis. The gap between nonprofit hospital tax exemptions and charitable care spending would be even larger if the researchers took into account Drug discount program 340B That, too, is subsidized by taxpayers, she added.

A spokesperson for the American Hospital Association said in a statement that the Kaiser Family Foundation analysis was narrow and excluded. “common gap between federal reimbursements for care and the actual cost of care.” The spokesperson cited a 2022 report by consulting firm EY, commissioned by the AHA, which found that for every dollar exempted from taxes, hospitals provided $9 in benefits to the community.

The value of nonprofit tax exemptions, unadjusted for inflation, has increased from the Kaiser Family Foundation’s Medicare policy program, said Zachary Levinson, project director for the Kaiser Family Foundation’s Medicare policy program and co-author of the report. $20 billion in 2011 to $28 billion in 2020.

“The tax exemption has many benefits for nonprofit hospitals,” he said. “We hope this data can help assess whether the tax benefit is a good deal for the government.”

charity care, which hospitals count as free or reduced-price care provided to patients, is a component of the hospital’s public welfare spending. Research has shown that there is little difference between the amount of charity care provided by nonprofit and for-profit hospitals. The Medicaid shortfall, or the gap between Medicaid payments and the hospital’s estimated costs for those services, is often the largest portion of a hospital’s public welfare spending.

But the Medicaid shortfall, which was not included in the KFF analysis, is not a good measure of public welfare spending, said Gerard Anderson, professor of international health and health policy at Johns Hopkins University. who studies charity care spending of nonprofit hospitals, said.

“The whole concept of Medicaid deficiency makes no sense to me,” said Anderson, who was not affiliated with the KFF study. “The more expensive your hospital, the higher the Medicaid shortage.”

In addition to charitable care and Medicaid grants, nonprofit hospitals’ public benefit spending includes public health investments such as testing clinics, workforce training programs, and infrastructure improvements such as housing developments, among other initiatives. Gary Young, director of the Center for Health Care and Health Policy Research at Northeastern University, says those are tiny fractions of a hospital’s public welfare spending, and there’s a big difference in the amount. funding as well as the type of program they offer. on the Internal Revenue Service advisory committee from 2012 to 2015 Monitor data from hospital federal tax forms.

“Hospitals are not yet equipped to engage in infrastructure improvement and that kind of activity,” he said. “So we’re left with significant value exemptions for nonprofit hospitals, a lot of variation in what hospitals offer and how to fix that change.”

Some states have imposed laws that force nonprofit hospitals to spend a certain percentage of their total costs on public welfare spending. Oregon for example, designate each hospital a mandatory level of public benefit spending biennial based on factors such as the hospital’s financial position, workforce, and community demographics.

State officials, including Senator Chuck Grassley (R-Iowa), have offered a number of federal policy solutions, although these proposals often face stiff opposition from advocacy groups. hospital corridors.

The Kaiser Family Foundation researchers noted a number of policy solutions including an exchange system in which hospitals would have to subsidize the charity care of other hospitals if they failed to meet the requirements. to the minimum spending threshold for charity care. Another policy involves replacing existing tax benefits with an allowance tied to the value of the community benefits provided.

At a minimum, nonprofit hospitals should be required to disclose their estimated exemptions on their federal tax forms, Mr. Bai said.

Hospitals need more guidance from the IRS about what the community expects from them, and some flexibility to meet the biggest unmet needs in their communities, Young said.

“The elephant in the room is a big disparity in public welfare spending with some hospitals providing more than others and we have largely ignored that,” he said. “Are we going to continue to ignore it or do something about it?”

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