Medicaid Reform To Clarify Debate Over Charity Care

By Jamey Dunn, Illinois Issues
Changes to the state’s Medicaid program, which Gov. Pat Quinn recently signed into law, were heralded as historic reform and are expected to shave billions off of the state’s liability under the program. But the sweeping plan also attempts to resolve some longstanding disputes over health care policy in Illinois. This is part one in a two-part series that looks at those components of the new law.

The reform package, which contained five separate bills, will make a number of changes. It will reduce some services offered through Medicaid, increase taxes on cigarettes and other tobacco products and give coverage to thousands of uninsured residents of Cook County. The plan also aims to resolve the longstanding issue of what hospitals must do to be considered charitable organizations eligible for local property tax exemptions.

Under the new law, hospitals must provide charity care and other services that are equal to the tax liability that they would have incurred without the exemption. In the past, hospitals have argued that there were no clear standards for what they must do to receive the exemption. A 2010 Illinois Supreme Court ruling found that Provena Covenant Medical Center in Champaign County did not qualify for the tax exemption. Following the ruling, the Illinois Department of Revenue pulled exempt status from Northwestern Memorial Hospital's Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur Memorial Hospital. The department said it used characteristics defined in the Provena decision to determine the later rulings.

Governor Quinn put a hold on any new rulings from the Department of Revenue and tried to work out a separate deal with hospitals. But the March 1, 2012, deadline he set for reaching an agreement came and went with no results. Instead, the solution came in May at the end of the spring legislative session, slipping somewhat under the radar as just one component of a proposal to reduce the state’s Medicaid liability by $2.7 billion.

Previously, John Colombo, a tax law professor at the University of Illinois said that hospitals argued that any community outreach was charitable. But he said that would change under the law. “You don’t get to count every single dollar that you put into health fairs.”  Colombo also said that there is a need to modernize thinking about hospitals and charity care. But he is looking a little further back in time.

 “The real issue is, are hospitals really charities at all?” he said. “Hospitals got labeled as charitable in the 1800s and early 1900s, when hospitals were places where poor people went to die. ... The thing that we call a hospital today did not exist.” He added: “Maybe we need to let go of the past, and we need to just recognize that an industry that is labeled as charitable because of what they did 100 years ago isn’t charitable anymore. They’re running a business.”

You can read Jamey's full report at: http://illinoisissuesblog.blogspot.com/2012/07/medicaid-reform-seeks-to-put-hospital.html