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Abstract: Lack of access to health care services continues to rise at remarkable rates in America placing a greater dependence on the use of charity care for those unable to afford health care services. Although the passing of the Patient Protection Affordable Care Act (PPACA) aims to remedy much of this issue, nonprofit hospitals have come under scrutiny from various public officials for the amount of charity care provided currently while gaining numerous financial gains from their nonprofit tax status. Various authors and politicians have suggested using financial data of total charity care as a measure for the amount of charity care nonprofit hospitals must provide. A sample of sixty-four California hospitals' financial indicators for the tax year 2010 analyzed resulted in 84.4% of hospitals reporting a total charity care percentage above 5%. Moreover, the subsection "unreimbursed Medicaid" accounted for most significant charity care cost for 93.75% of the hospitals analysis.
It states that "[t]he term charitable is used in section 501(c)(3) in its generally accepted legal sense," and provides examples of charitable purposes, including the relief of the poor or unprivileged; the promotion of social welfare; and the advancement of education, religion, and science.4 In the absence of explicit statutory or regulatory requirements applying the term "charitable" to hospital [...] Over the years, the IRS has developed two distinct standards: the "charity care standard" and the "community benefit standard." Charity Care Standard In 1956, the IRS issued Revenue Ruling 56-185, which addressed the requirements a hospital needed to meet in order to qualify for § 501(c)(3) status as a charitable organization.5 One of these requirements is known as the "charity care standard." The [...] The IRS reasoned that because the promotion of health was a charitable purpose according to the general law of charity, it fell within the "generally accepted legal sense" of the term "charitable," as required by Treasury regulation.7 Expanding on this point, the ruling stated that The promotion of health, like the relief of poverty and the advancement of education and religion, is one of the purp [...] It appears the community benefit standard was adopted partly in response to the enactment in 1965 of Medicare and Medicaid, which some thought would reduce the need for hospitals to provide charity care.10 Its adoption by the IRS may also have been a response to concerns about the charity care standard. [...] Congressional Research Service 2 501(c)(3) Hospitals and the Community Benefit Standard IRC § 501(c)(3) for hospitals.11 The House Report accompanying the bill expressed concern with how the charity care standard was applied in practice: In a number of cases internal revenue agents have challenged the exempt status of hospitals on the sole ground that the hospitals are accepting insufficient numbe.
Why is America's health care system so expensive? Why do hospitalized patients receive bills laden with inflated charges that com out of the blue from out-of-network providers or demands for services that weren't delivered? Why do we pay $600 for EpiPens that contain a dollar's worth of medicine? Why is more than $1 trillion - one out of every three dollars that passes through the system - lost to fraud, wasted on services that don't help patients, or otherwise misspent? Overcharged answers these questions. It shows that America's health care system, which replaces consumer choice with government control and third-party payment, is effectively designed to make health care as expensive as possible. Prices will fall, quality will improve, and medicine will become more patient-friendly only when consumers take charge and exert pressure from below. For this to happen, consumers must control the money. As Overcharged explains, when health care providers are subjected to the same competitive forces that shape other industries, they will either deliver better services more cheaply or risk being replaced by someone who will.