Scrounging for revenue
Cash-strapped states are increasingly scrutinizing hospital tax exemptions
Notes on the news:
In our March 21 cover story (p. 6), reporters Joe Carlson and Melanie Evans examined new disclosures of community benefits by tax-exempt hospitals. This information was included in the first and limited rollout of Internal Revenue Service Schedule H filed with annual Form 990 disclosures.
The results were underwhelming. On average, each hospital devoted 2.5% of all its expenses to providing charity. If losses on Medicaid and other subsidies were included, the figure rose to 8.3%. Overall, nine out of 10 respondents failed to provide enough free and discounted care to earn tax breaks under a congressional proposal that would have forced hospitals to devote 5% of their expenditures to care for the poor.
Later, on this page (March 28, p. 24), we predicted that economic conditions would put more pressure on hospitals to substantially increase charity care or risk unwelcome scrutiny. Reinforcement of that point came last month in Illinois when the state Revenue Department moved to yank the tax exemptions of three facilities (Aug. 22, p. 14). The department added that it is reviewing the exempt status of as many as 15 other hospitals.
Look for more such actions from cash-strapped state and local governments desperately seeking revenue. The Great Recession, the deepest and longest downturn since the Great Depression, has sapped tax revenues while the need for social services such as Medicaid is increasing. High unemployment lingers as a millstone on an economy that is composed 70% of consumer spending. But out-of-work consumers have less to spend and many others are afraid to part with money because they may lose their jobs.
In better times, governments wouldn’t press the tax-exemption issue. But when the public and the politicos note that hospitals are engaged in huge construction projects, that their prices are among the highest in the world, and that their doctors and executives are compensated well above the charity cases in the waiting rooms, it’s hard not to demand a greater return on tax subsidies.
If state and local politicians are unsympathetic to provider complaints about joblessness and uncompensated care, don’t expect a better reception from federal lawmakers and officials. They are oblivious to anyone else’s plight. That’s how they could spend months arguing about debt ceilings, deficits and decimating social insurance programs while polls indicated the public was overwhelmingly more concerned with jobs and the economy.
A recent Gallup poll shows one reason why unemployment gets little more than lip service in the nation’s capital. There’s an old joke that says a recession is when your neighbor loses his job and a depression is when you lose your job. In official Washington, there is neither a recession nor a depression. The once-sleepy metro area has morphed into a booming political-industrial complex of government contractors, companies with big interests in government regulation and/or subsidies, trade associations, lobbyists, public relations spin factories and lawyers. Even though some deeply poor neighborhoods lie in the shadow of the Capitol building, professional, affluent D.C. never mingles with these people.
The Gallup poll showed that of all the states and the District of Columbia, only D.C. registered a positive score on public confidence in the economy. It posted an index reading of +11 while all the states ranged from -13 down to -34. Maryland and Virginia, in the D.C. orbit, while showing negative outlooks still fell in the top 10 for economic optimism.
Anemic economy? Unemployment? Uncompensated care? You can’t see those from Washington.