Hospitals Cutting Charity Care; Relying on Affordable Care Act Coverage

As reported in Sunday’s The New York Times, a trend among hospitals around the country is to reduce financial assistance to uninsured patients with the intent of forcing such patients to obtain coverage under the Affordable Care Act.  The criticism is obvious – uninsured lower- and middle-income citizens without coverage will not take advantage of the ACA due to perceived, and perhaps actual, unaffordability and therefore forgoe health care all together.  The push-and-pull for hospitals centers on the ACA’s reduction of federal payments to hospitals that treat large number of uninsured patients (again, hoping to force such patients to seek coverage in online marketplaces) and the actual need to provide free or reduced-cost health care to those most in need of it.  

The Times article illustrates hospitals’ various policies to address this real problem:

In St. Louis, Barnes-Jewish Hospital has started charging co-payments to uninsured patients, no matter how poor they are. The Southern New Hampshire Medical Center in Nashua no longer provides free care for most uninsured patients who are above the federal poverty line — $11,670 for an individual. And in Burlington, Vt., Fletcher Allen Health Care has reduced financial aid for uninsured patients who earn between twice and four times the poverty level.

Continuing charity care for the uninsured, argues some health care providers, defeats the very purpose of the ACA.  However, uninsured advocates argue that many uninsureds forgoe coverage under the ACA inaugural enrollment because the plans are expensive, even with government subsidies.  Some argue that it is still a matter of message – encouraging people who now have access to coverage under the ACA to take advantage of the opportunity.

The article further states:

Many hospitals appear focused on reducing aid only for patients who earn between 200 percent and 400 percent of the poverty level, or between $23,340 and $46,680 for an individual. Many of those people presumably have jobs and would qualify for subsidized coverage under the new law.

The Times further reported that financial challenges for uninsureds are “particularly daunting” in the states that have not yet expanded their Medicaid programs, which currently totals over 24 states.

An issue not addressed by the Times Article is how these emerging charity care policies, to best comply with and take advantage of the new ACA reimbursement rules, will affect these tax-exempt hospitals’ Form 990 Schedule H reporting?  Has Congress and the IRS contemplated the changes to charity care numbers in light of the above-referenced ACA rules?

Nicholas Mirkay