Alternative Funding Policies for the Uninsured: Exploring the Value of Hospital Tax Exemption

• Published in: The Milbank quarterly 2000-01, Vol.78 (2), p.185-212
• Main Authors: Kane, Nancy M., Wubbenhorst, William H.
• Format: Article
• Language: English
• Subjects: Average cost; Bad debt; Care; Charity; Financial Support; Financing; Health care; Health Care Services Policy; Health Insurance; Health Policy - economics; Health services; Hospital costs; Hospitals; Hospitals, Voluntary - economics; Hospitals: Reassessing Accountability; Humans; Income taxes; Medically Uninsured; Models, Economic; Non-profit organizations; Nonprofit hospitals; Nonprofit Organizations; Original; Poverty; Private health care; Property taxes; Public Policy; Tax benefits; Tax Exemption; Tax exemptions; Taxation; Teaching hospitals; Uncompensated Care; Uninsured patients; United States; USA
• ISSN: 0887-378X; 1468-0009
• DOI: 10.1111/1468-0009.00168

The tax exemption accorded private, nonprofit hospitals is being subjected to more scrutiny as the numbers of uninsured grow; meanwhile, charity care competes with market-driven priorities. Current public policies tie hospital tax exemption to the provision of charity care, but there is a gap in the size and distribution of values between tax exemption and the charity care that is provided. Most hospitals, in a study reported here, provided free care at a level below the value of their tax exemption, even when 50 percent of bad debt was included in the care value. However, hospitals in the poorest communities offered considerably more care than the value of their tax exemption, whereas those in wealthier communities offered considerably less. Policies at local, state, and federal levels should be designed to exert leverage on hospitals to provide free care at a level commensurate with the value of their tax exemptions.