Legislative Affairs

June 2010

Health Care Reform Becomes Law

The House and Senate cleared the final piece of comprehensive health care reform, adopting a reconciliation measure (H.R. 4872) that makes adjustments to the bill President Obama signed into law. The reconciliation measure contains a few technical modifications to the originally passed health reform bill, including expanding the access of affordability tax credits for individuals and families to purchase health insurance. The package makes no changes to the additional requirements for nonprofit hospitals for tax exempt status in the original Senate bill.

The final bill contains the following provisions relevant to hospitals/medical centers:

Community Needs Assessment requirement (once every three years).
Financial Assistance Policy requirement.
Review of tax-exempt hospitals by the IRS (once every three years).
Annual review of tax-exempt hospitals provision of charitable care, bad debt and the unreimbursed cost of means-tested & non-means-tested government programs by the Treasury and HHS.

The bill also adds a new section 4959 to the Internal Revenue Code which imposes an excise tax penalty of $50,000 for any nonprofit hospital that fails to satisfy the community health needs assessment.

The final bill does not limit the tax deductibility of charitable gifts.

March 2010

Congress Faces Key Matters for Charities and Donors in the New Year

As Congress returns to work after its winter break, lawmakers are taking up several key issues important to charities and donors. Among them:

Estate tax. In 2001 Congress passed the current estate-tax law, which gradually phased out the tax through 2009 and repealed it for 2010. However, in 2011 the current law is set to expire and estate-tax levels that applied years earlier at higher rates are scheduled to go back into effect.

The House of Representatives last month passed a bill that would eliminate the 2010 repeal and permanently keep the estate tax at levels that were in effect in 2009. Because the Senate has not yet voted on the provision, no estate tax exists currently.

The estate tax that applied in 2009 allowed heirs to exempt $3-5-million ($7-million for couples) and face a top tax rate of 45 percent. The estate tax that is scheduled to apply in 2011 would provide an exemption of $1-million and a top tax rate of 55 percent.

Health care. The House and Senate are working to merge their separate bills to overhaul the health-care system. Provisions currently in both bills would require nonprofit employers to offer their workers health insurance or pay a tax. The Senate bill would allow small nonprofit groups to qualify for tax credits if they offer health coverage to employees, but the House bill offers such credits only to for-profit employers. The Senate bill also adds new requirements for tax-exempt hospitals. One would have such hospitals conduct a “community health needs assessment” every three years.

December 2009

Healthcare Reform Bill Proposes New Requirements for Nonprofit Hospitals

The Senate Finance Committee released on September 16th its health care reform bill, America’s Health Future Act. The bill proposes additional requirements for nonprofit hospitals, including the following:

Community Needs Assessment. To be preformed at least once every three years with input from the community and the assistance of individuals with special knowledge or expertise of public health issues.
Community Benefit Review. To be performed by the IRS at least once every three years based on information provided in the IRS Form 990.
HHS Annual Reports to Congress. To report levels of charity care, bad debt expenses, unreimbursed costs of government programs and the cost of community benefit activities. • Promotion of Financial Assistance Policy. Creation and implementation of a policy to widely publicize the health care organization’s financial assistance policy and how to apply for assistance, and to prevent discrimination against those eligible for financial assistance who seek emergency treatment.
Limitation on Charges & Collections. Limitation on billing patients who qualify for financial assistance to no more than the amount generally billed to insured patients and a limitation on taking extraordinary collection actions against patients without first making attempts to inform the patient about the health care organization’s financial assistance policy.

September 2009

Congress Continues to Consider Alternative Ways to Fund Healthcare Reforms

Two proposals have been introduced by Congress to fund healthcare reforms by reducing charitable deductions for those who earn more than $200,000 (and those couples and families who earn more than $250,000).

In his FY10 budget, President Obama proposed limiting itemized deductions for these taxpayers at a 28 percent rate beginning in 2011. An alternative, modified proposal also has been suggested that would limit itemized deductions to 33 percent or 35 percent, for taxpayers whose income tax brackets would increase to 36 percent or 39.6 percent in 2011.

Although President Obama has continued to advocate in favor of his limitation on itemized deductions to fund healthcare reforms, at this point, two other major funding mechanisms have been proposed for healthcare reforms.

June 2009

The American Recovery Act Provides $150 Billion for Health Care

The American Recovery and Reinvestment Act of 2009 signed by President Obama allocates 150 billion dollars to the U.S. health care sector. Congress distributed these funds to a variety of different program areas, including, but not limited to:

$1.1 billion for comparative effectiveness research
$1.4 billion for the construction and renovation of health care facilities
$19.2 billion for the improvement and advancement of health care technology at community health centers
$338 million for Medicare payments to teaching hospitals, hospices and long-term care facilities
$50 million to DHHS for the improvement of security in health care technology

As exemplified in these allocations, the advancement of health care technology is of primary concern to the President and Congress. As a corollary, increased attention has also been aimed at securing patient information and has manifested into reiterating and tightening the provisions of HIPAA.