Up to 17 million people may lose their healthcare coverage with the new changes to the Affordable Care Act marketplace under President Trump’s “One Big, Beautiful Bill” — including 1.7 million Texans. The OBBB cuts $1 trillion in healthcare spending over the next decade, mostly from Medicaid, the joint federal and state program that provides health insurance to millions of low-income Americans. While policymakers debate how many Americans will be removed from Medicaid, the question remains — what will happen to the millions of Americans who lose their health insurance?
Although many Americans don’t know it, nonprofit hospitals provide a private safety net for low-income and uninsured patients right now. It’s called charity care, and state legislatures and nonprofit hospitals should take it more seriously.
Under 501 (r) of the tax code, nonprofit hospitals are required to provide a “financial assistance policy” — called charity care — that offers free or heavily discounted care for low-income and uninsured patients. Since over half of US hospitals are nonprofits, charity care should be accessible to many Americans.
Uninsured and low-income patients who earn less than 400 percent of the federal poverty level (FPL) are typically eligible to submit a charity care application. In other words, a family of four making less than $128,600 and an individual making less $62,600 would be eligible for charity care. Upon approval, patients can have the entire cost of their medical bill completely covered or heavily discounted by the hospital. On income alone, over 93 million Americans could qualify for charity care.
In exchange for providing charity care, nonprofit hospitals are exempt from virtually all state, federal, and property taxes. The total tax exemption of nonprofit hospitals is estimated to be over $25 billion — enough to pay off all the medical debt in Texas, California, Pennsylvania, and New York right now. Nonprofit hospitals are afforded these generous tax benefits because it is expected that the hospitals will spend their tax-spared revenue to benefit the communities they serve.
And nonprofit hospitals in Texas are no exception. To justify their exemption from federal and state taxes, Texas non-profit hospitals are required by state law to provide charity care and other community benefits. But recent evidence suggests that Texas has serious holes in its charity care disclosure policy.
Texas leads the nation with the highest uninsured rate with roughly 5 million Texans being uninsured. On income alone, over 19 million Texans have incomes below 400 percent of the FPL. In other words, 6 out of 10 Texans qualify for charity care based on income.
Despite over 60 percent of Texans qualifying for charity care, recent polling done by WPA Intelligence found that 87 percent of Texans are unaware that non-profit hospitals are required to provide charity care. Unfortunately, this is not shocking considering the Texas Health and Safety Code only requires hospitals to disclose their charity care policy by posting signs in conspicuous spaces throughout their facilities and publishing print newspaper ads in their community’s local newspaper.
A $5 million study conducted by the Texas Health and Human Service Commission (HHSC) found a serious lack of oversight in Texas’ charity care disclosure requirements. The report stated that there is no oversight process or procedure identified in state statute to verify whether or not non-profit hospitals are in compliance with their charity care disclosure requirements. The absence of clear methods for reporting and identifying patients who are eligible for charity care leaves Texans needlessly vulnerable to financial hardships.
When the HHSC report reviewed non-profit hospital charity care program details, they found that hospitals “did not provide yearly statistic information about charity care patients.” The authors had to distribute a survey to collect the number of patients enrolled on a hospital’s financial assistance policy, the number of rejected charity care applicants, and the number of rejected applicants that were sold as bad debt to debt collectors. The report notes, “In some cases, hospitals were unable or declined to provide the requested information, or did not respond to the survey request.”
Many hospital proponents assert that Texas non-profit hospitals are providing ample “community benefit” and merit their tax exemptions. However, non-profit hospitals’ inability to provide HHSC researchers with basic information to fulfill the study means there is no way to verify hospitals’ claims that they are going above and beyond to offer charity care to their communities.
Nonprofit hospitals play a key role in their communities and save the lives of patients everyday. But with Texas granting nonprofit hospitals multibillion-dollar tax exemption status, proper oversight is necessary to ensure Texans have access to this vital private safety net.
The debate over how to help with the 1.7 million Texans who might lose their healthcare coverage will continue. Texas has the opportunity to catch the patient who will lose their healthcare coverage by strengthening its charity care laws.
