“Greed in a Good Cause is Still Greed”

The government is spending $24.6 billion every year on tax breaks for approximately 2,100 nonprofit hospitals in the United States. But in return, these nonprofit hospitals are only spending 3% of their budgets on charity care. Seventy-one percent of these nonprofit hospitals charge uninsured patients more than insured patients for the exact same services, 66% of nonprofits neglect to tell patients when they are eligible for charity, and 17% aggressively collect debt from uninsured patients by reporting them to creditors, filing lawsuits against them, or putting liens on their property.

Source: Liz West (Flickr/CC)

Source: Liz West (Flickr/CC)

As the Affordable Care Act has been implemented, charity care is more important to states that have not expanded Medicaid; those states continue to demonstrate high uninsured rates. However, nonprofit hospitals in these states currently offer less charity care than nonprofit hospitals in states expanding Medicaid.

The average Federal Poverty Level needed to qualify for charity hospital care in expansion states is 179% of the FPL ($35,961 for a family of 3). In non-expansion states, where a coverage gap still exists for 3.1 million Americans earning less than 100% FPL who are neither eligible for Marketplace subsidies nor Medicaid,  the average is 202% FPL ($40,582 for a family of 3). A small but statistically significant difference also exists in other elements of charity care: in non-expansion states, 3% fewer nonprofit hospitals have written charity policies, 8% fewer notify patients they are eligible for charity, 4% fewer offer free care, 7% fewer offer discounted care, and 4% more use aggressive debt collection techniques.

In order to keep nonprofit benefits, the ACA places new requirements on hospitals. These requirements go into full effect in 2016. Hospitals can’t charge the uninsured more than the insured, must notify the uninsured of available charity, and must stop aggressive debt collection. These rules will require major changes to current policy for over two-thirds of nonprofit hospitals.

Nonprofits also must conduct community needs assessments every 3 years and maintain a written policy for financial assistance for care. However, the rules do not require that financial assistance be generous or that hospitals change their policies based on their communities’ needs. Therefore, these new policies are unlikely to impact the provision of charity care. Nonprofit hospitals are getting large tax breaks while many are actively avoid helping the uninsured. Unfortunately, the new tax rules are only going to provide partial relief for communities in need of charity care.

commentary by Laura Medford-Davis

Nikpay, SS and Ayanian, JZ. NEJM. 2015; 373 (18): 1687-1690. PMID: 26510018