Non-profit hospital tax exemptions still under the gun

As health reform legislation evolves, non-profit hospitals' tax exemptions continue to be a target for legislators, with powerful Senators continuing to float the notion that non-profits be required to provide minimum levels of charity care, limit charges to the uninsured and swear off aggressive collections techniques. Under such proposals, advanced by Senate Finance Committee leaders Max Baucus (D-MT) and Chuck Grassley (R-IA), non-profits who don't toe the line would face an excise tax.

Non-profit hospitals are understandably worried about anything that could cut back on their exemption, which spared the industry about $12.6 billion in 2006 according to the Congressional Budget Office. And they suggest that a one-size-fits-all charity care requirement is unfair, given that each hospital market imposes its own challenges.

If their tax exemptions were completely eliminated, the impact would be drastic, industry leaders say. Hospitals would not only have trouble caring for the uninsured, they'd also have a much harder time raising money, executives say. Right now, they can issue tax-exempt bonds, which lets them borrow money for a much lower interest rate than investor-owned hospitals. And of course, people could no longer receive personal income tax deductions for moneys donated.

It's worth noting that no one on the Hill seems to be proposing that non-profits lose their deductions entirely. But raising the specter of complete tax exemption losses sure galvanizes people, doesn't it?

To learn more about this issue:
- read this Wall Street Journal piece

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