On the chop­ping block

Mu­nic­i­pal bonds could be seen as part of deficit fix

Modern Healthcare - - Cover Story - Me­lanie Evans

Congress last week left $1.5 tril­lion in deficit re­duc­tions over 10 years to be sorted out by a dozen lawmakers. Spec­u­la­tion quickly fo­cused on how cuts could be squeezed from gov­ern­ment pay­ments to hos­pi­tals and doc­tors.

Not-for-profit hos­pi­tals, how­ever, could see an­other fi­nan­cial chal­lenge emerge from the se­lect com­mit­tee charged with draft­ing the deficit-re­duc­tion plan by Thanks­giv­ing, health­care fi­nance ex­perts said.

Tax-ex­empt mu­nic­i­pal bonds, one ma­jor source of cap­i­tal for hos­pi­tal con­struc­tion, tech­nol­ogy and other ma­jor in­vest­ments, may be un­der scrutiny should the com­mit­tee con­sider tax re­forms to raise rev­enue. The Joint Com­mit­tee on Tax­a­tion es­ti­mates the fed­eral cost of hos­pi­tal tax-ex­empt bonds to­taled $1.8 bil­lion in 2010. Mean­while, the Of­fice of Man­age­ment and Bud­get said the lost rev­enue to­taled $3.5 bil­lion last year and an­other $3.6 bil­lion this year. Be­tween 2012 and 2016, the amount is ex­pected to to­tal $26.8 bil­lion, the OMB said.

The Amer­i­can Hos­pi­tal As­so­ci­a­tion in July said the trade group was track­ing mu­nic­i­pal bond tax ex­emp­tion in the talks to raise the nation’s debt ceil­ing. In an in­ter­view last week, Michael Rock, se­nior as­so­ciate di­rec­tor of fed­eral re­la­tions for the AHA, said, “I think it will be dis­cussed and con­sid­ered” by the Joint Se­lect Com­mit­tee on Deficit Re­duc­tion.

Tax breaks, in­clud­ing those for in­vestors who buy gov­ern­ment and not-for-profit bonds, have been sin­gled out as one pos­si­ble fix by lawmakers in both par­ties and by pol­icy ex­perts, most no­tably by the Na­tional Com­mis­sion on Fis­cal Re­spon­si­bil­ity and Re­form last year (Nov. 15, 2010, p. 6).

“We need to act as if it’s a con­crete pos­si­bil­ity,” given the level of in­ter­est and the ur­gency of deficit talks, said Chuck Sa­muels, an at­tor­ney with Mintz, Levin, Cohn, Fer­ris, Glovsky and Popeo in Wash­ing­ton. Sa­muels rep­re­sents the Na­tional As­so­ci­a­tion of Health and Ed­u­ca­tion Fa­cil­i­ties Fi­nance Authorities, which brings not-for-profit hos­pi­tal bonds to the tax-ex­empt mar­kets.

The Na­tional Com­mis­sion on Fis­cal Re­spon­si­bil­ity called for an end to all tax ex­emp­tions, ex­cept for some smaller and more tar­geted ones. Tax­able in­ter­est for newly is­sued mu­nic­i­pal bonds ranked among the com­mis­sion’s pri­or­i­ties for fun­da­men­tal tax re­form by 2012.

Since then, four bills that would elim­i­nate or over­haul tax breaks—known as tax ex­pen­di­tures in pol­icy cir­cles—have been in­tro­duced in Congress, ac­cord­ing to a sum­mary by the Na­tional As­so­ci­a­tion of Bond Lawyers. Sen. Ron Wy­den (D-Ore.) in April in­tro­duced a bill to re­place mu­nic­i­pal


Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.