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Congress May Soon Set Standards for Charity Care at Nonprofit Hospitals, Orange County Medical Bankruptcy Law Firm Reports

March 18, 2009

As Anaheim bankruptcy attorneys, we were pleased to see in the Baltimore Sun that Congress is considering legislation that would set national standards for nonprofit hospitals' "charity care" -- free or reduced-cost care for people with low incomes. Before Medicare and Medicaid were created, hospitals had to meet specific charity care standards to qualify as nonprofits; afterward, they only had to prove that they provided a benefit to the community. After an IRS report was published showing that a fraction of nonprofit hospitals provide the bulk of the nation's "charity care," Sen. Chuck Grassley, R-Iowa, told the newspaper that he would write legislation to bring back the IRS requirement, if the IRS itself would not.

Many nonprofit hospitals do provide charity care, but there is no federal requirement that they do so and no national standard to make it consistent. Hospitals may set eligibility at a certain percentage of the federal poverty guidelines or take into account assets as well as household income, with no requirement to adjust for the high cost of living in urban areas or other circumstances. They are free to set any standard they like, and they are not required to verbally tell patients about their programs. All of this conspires to keep the rate of charity care low. Grassley's proposal could change that by requiring nonprofit hospitals to provide charity care equaling at least 5% of their annual revenue.

This issue matters to our Santa Ana bankruptcy lawyers because medical debt is responsible for more than half of all consumer bankruptcy filings, according to a 2005 study at Harvard. That's true even for people who have some amount of health insurance, but not enough to fully cover their medical problems. Hospital bills, which can quickly reach five or six figures, are a big part of that problem. If nonprofit hospitals are failing to provide a significant amount of charity care, as the IRS report suggests, we like the idea that they should choose between increasing that care or accepting for-profit status and taxation.

At Howard Law LLP, we specialize in helping consumers who feel overwhelmed by debt problems, including problems with medical debt as well as credit cards, mortgage loans and others. Our Cypress bankruptcy attorneys can help clients decide if bankruptcy is the best way to deal with the debt, help with debt settlement or fight unfair, harassing practices by debt collectors. If this sounds like you and you know you need help, you can contact us online for a free, confidential consultation or call 1-800-872-5925.