April 04, 2024
Lee, Velázquez, and Lieu Lead Colleagues in Call to IRS to Tackle Medical Debt From Non-Profit Hospitals
Washington, D.C. or Oakland, CA – Today, Representatives Barbara Lee (D-CA), Nydia M. Velázquez (D-NY), and Ted Lieu (D-CA) led a letter to Internal Revenue Service (IRS) Commissioner Daniel Werfel calling on the agency to use its authority to ensure greater accountability for nonprofit hospitals contributing to the medical debt crisis impacting over 100 million individuals living in the US.
Medical debt also has a disproportionate impact on Black, Hispanic, and Asian American Pacific Islander populations. The national average for medical debt in collections is 11 percent in white communities and 15 percent in communities of color. Representatives Velázquez, Lee, and Lieu are senior members of the Congressional Hispanic Caucus, Congressional Black Caucus, and Congressional Asian Pacific American Caucus.
“The IRS is in a unique position to reduce medical debt at an even greater scale at the federal level. Most U.S. adults with medical debt owe money to hospitals, and nearly 60 percent of hospitals have nonprofit status under federal law,” wrote the lawmakers. “We urge the IRS to clarify, strengthen, and enforce requirements for nonprofit hospitals relating to financial assistance and collection actions.”
Despite their tax-exempt status, nonprofit hospitals spend proportionally less on charity care than for-profit hospitals. In fact, 45 percent of nonprofit hospitals routinely bill patients whose incomes are low enough to qualify for financial assistance. Some nonprofit hospitals even engage in aggressive collection actions that harm their patients, like garnishing wages and denying medical care due to outstanding bills.
In the letter, the lawmakers call on the IRS to strengthen and enforce the regulations for nonprofit hospitals under Section 501(r) of the Internal Revenue Code. Under Section 501(r), nonprofit hospitals are required to adopt and publicize a financial assistance policy, cease billing gross charges, and limit the use of extraordinary collections actions until the hospital has made reasonable efforts to determine whether a patient is eligible for financial assistance.
The representatives also urged the IRS to issue much-needed guidance to nonprofit hospitals on expectations for charity care.
“The IRS has an important role to play in reducing medical debt, which remains an unfortunate reality for millions of families in the United States,” wrote the lawmakers. “We urge the IRS to ensure accountability for nonprofit hospitals and to protect families from the destructive effects of medical debt.”
In addition to Velázquez, Lee, and Lieu, the letter was also signed by Representatives Jonathan Jackson (D-IL), Pramila Jayapal (D-WA), Summer Lee (D-PA), Eleanor Holmes Norton (D-DC), and Rashida Tlaib (D-MI).
The letter is also endorsed by Community Catalyst.
“Non-profit hospitals are failing their communities. With 4 in 10 adults experiencing health care debt in America, and 3 in 4 non-profit hospitals failing to provide enough free or discounted care to their communities to justify their tax breaks, it’s clear the problem is widespread,” said Emily Stewart, executive director of Community Catalyst, a national health justice organization that has convened more than 60 local, state and national organizations urging the Biden administration to act. “The driver behind medical debt is simple — health care is far too expensive and there aren’t enough protections in place for people. This is particularly true when it comes to non-profit hospitals, which get giant tax breaks for their non-profit status, yet too many end up prioritizing profits over care. This has to stop. And the burden is disproportionately carried by adults without insurance, women, Black and Hispanic adults, parents, immigrants, and those with lower incomes. No one should have to exhaust their life savings or retirement accounts, or lose their housing because they went to a hospital to seek care. We applaud the lawmakers urging action.” – Emily Stewart, Executive Director, Community Catalyst
For a full copy of the letter, click here."
“The IRS is in a unique position to reduce medical debt at an even greater scale at the federal level. Most U.S. adults with medical debt owe money to hospitals, and nearly 60 percent of hospitals have nonprofit status under federal law,” wrote the lawmakers. “We urge the IRS to clarify, strengthen, and enforce requirements for nonprofit hospitals relating to financial assistance and collection actions.”
Despite their tax-exempt status, nonprofit hospitals spend proportionally less on charity care than for-profit hospitals. In fact, 45 percent of nonprofit hospitals routinely bill patients whose incomes are low enough to qualify for financial assistance. Some nonprofit hospitals even engage in aggressive collection actions that harm their patients, like garnishing wages and denying medical care due to outstanding bills.
In the letter, the lawmakers call on the IRS to strengthen and enforce the regulations for nonprofit hospitals under Section 501(r) of the Internal Revenue Code. Under Section 501(r), nonprofit hospitals are required to adopt and publicize a financial assistance policy, cease billing gross charges, and limit the use of extraordinary collections actions until the hospital has made reasonable efforts to determine whether a patient is eligible for financial assistance.
The representatives also urged the IRS to issue much-needed guidance to nonprofit hospitals on expectations for charity care.
“The IRS has an important role to play in reducing medical debt, which remains an unfortunate reality for millions of families in the United States,” wrote the lawmakers. “We urge the IRS to ensure accountability for nonprofit hospitals and to protect families from the destructive effects of medical debt.”
In addition to Velázquez, Lee, and Lieu, the letter was also signed by Representatives Jonathan Jackson (D-IL), Pramila Jayapal (D-WA), Summer Lee (D-PA), Eleanor Holmes Norton (D-DC), and Rashida Tlaib (D-MI).
The letter is also endorsed by Community Catalyst.
“Non-profit hospitals are failing their communities. With 4 in 10 adults experiencing health care debt in America, and 3 in 4 non-profit hospitals failing to provide enough free or discounted care to their communities to justify their tax breaks, it’s clear the problem is widespread,” said Emily Stewart, executive director of Community Catalyst, a national health justice organization that has convened more than 60 local, state and national organizations urging the Biden administration to act. “The driver behind medical debt is simple — health care is far too expensive and there aren’t enough protections in place for people. This is particularly true when it comes to non-profit hospitals, which get giant tax breaks for their non-profit status, yet too many end up prioritizing profits over care. This has to stop. And the burden is disproportionately carried by adults without insurance, women, Black and Hispanic adults, parents, immigrants, and those with lower incomes. No one should have to exhaust their life savings or retirement accounts, or lose their housing because they went to a hospital to seek care. We applaud the lawmakers urging action.” – Emily Stewart, Executive Director, Community Catalyst
For a full copy of the letter, click here."