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How To Be Charitable

Harold Pollack is a public health policy researcher at the University of Chicago's School of Social Service Administration, where he is faculty chair of the Center for Health Administration Studies. He is a regular contributor to The Treatment.

In the New York Times, Robert Pear reports that nonprofit hospitals are mobilizing to fight proposed rules that would require greater provision of charity care. I bet they are. The $6 billion in annual tax benefits provided to nonprofit hospitals is a tempting target for Senators seeking new money for health reform. Senator Charles Grassley of Iowa, the senior Republican negotiating the health reform effort, has tangled with nonprofit hospitals before, particularly big university hospitals that are key beneficiaries of this provision. Many state policymakers feel the same.

It’s hard to give a thumbs-up or a thumbs-down assessment on this complicated question. (If you want to read about the niceties, several papers by Michigan legal scholar Jill Horwitz are a great starting point.)

In one corner are the nonprofit hospitals that treat no poor people, do not conduct research, locate in posh suburbs, and provide little public value in return for the tax benefits they receive. Many are de facto economic partnerships among attending physicians and other stakeholders. It’s hard to understand why they shouldn’t pay taxes like everyone else. In the opposite corner are the saintly providers such as Chicago’s Mount Sinai, which serve the poor and the infirm out of a deep sense of mission.

Then there is the crowded field of urban teaching hospitals and nonprofit institutions that do real good, but might do more. They train medical students, develop new treatments, and to one degree or another serve the poor and the uninsured. Some of these hospitals treat large numbers of the uninsured. Others send the uninsured packing. Most treat Medicaid patients, often regarding that treatment as an ostentatious discharge of their obligations to the wider society.

It’s depressingly easy to find nonprofits that provide poor people with technically defensible, but grudging and shabby treatment, followed by greater attention from the billing department than was shown in actual medical care. Bad debts aside, many hospitals provide essentially no charitable care, and honor in the breach various legal obligations they face to assist indigent patients who cannot pay their bills. Jonathan Cohn’s Sick provides a litany of examples from greater Chicago, most notoriously a nonprofit Catholic hospital pursuing a destitute retired nun over an unpaid emergency room bill.

I don’t know if Senator Grassley read Sick. He would have found ample support for his mood of high dudgeon. Serious health reform that approaches universal coverage will provide further ammunition, by lowering the uncompensated care burden most hospitals will assume. My wife and I are responsible for the medical care for her brother, who is disabled and receives Medicaid. I don’t care for being sent packing from various nonprofit hospitals that won’t let us use the pharmacy, that impose long waits, that force us to sit in Dickensian conditions when he needs emergency care. I really don’t care for it when hospital collection agents call after him over some messed-up bill

I’m ready join the charge to repeal that nonprofit exemption, except for one little thing: the massive failure of state Medicaid programs to pay what it actually costs to treat patients --or to actually pay when that money is owed .

One way to quantify this shortfall is to compare what Medicare and Medicaid pay for similar services. This is an imperfect but pretty fair standard. Medicare is hardly the Cadillac payer of the medical marketplace. It probably underpays primary providers, and some of the bitterest debate over the proposed public insurance plan concerns whether the government can impose Medicare rates on recalcitrant providers. The disparity between the two public programs remains striking. Medicaid reimbursements for primary care visits in California, DC, New York, and New Jersey are less than half that provided by Medicare, with predictable results. In many states, including my own, Medicaid takes more than twice as long to pay as commercial insurers do.  If you pretend to pay for needed care, you can hardly complain when providers pretend to provide it.

This suggests a modest proposal: Go ahead, policymakers in Springfield, Albany, and Washington: Remove that tax exemption for nonprofit hospitals. Only first, guarantee the same payments for my brother-in-law on Medicaid as are provided for my mom on Medicare. Any takers? Didn’t think so. 

--Harold Pollack