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Tax-Exempt Status For Nonprofit Hospitals Under The ACA: Where Are The Final Treasury/IRS Rules?


October 23rd, 2014

Months have now stretched into years, and there still remains no sign of final Treasury/IRS regulations interpreting the Affordable Care Act (ACA)’s provisions covering the expanded obligations of nonprofit hospitals that seek tax-exempt status under §501(c)(3) of the Internal Revenue Code.

The ACA amendments do not depend on formal agency policy to take effect. Nonetheless, Congress directed the Treasury Secretary to issue regulations and guidance necessary to carry out the reforms (26 U.S.C. §501(r)(7)). To this end, two important sets of proposed rules were issued: the first in June, 2012; and the second, in April 2013. While an informative IRS website lists various proposed rules and guidelines important to nonprofit hospitals, final rules seem to have performed a disappearing act.

Apparently recognizing the problems created by its delays, the agency has gone so far as to issue a special Notice letting nonprofit hospitals (and presumably the public) know that they can rely on its proposed rules. But this assurance overlooks the fact that the proposed rules themselves contained crucial areas in which final agency policy has not yet been adopted.

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After Hobby Lobby: How Might Policymakers Mitigate The Decision’s Impact On Women And Families?


July 3rd, 2014

Editor’s note: In addition to Sara Rosenbaum, Adam Sonfield and Rachel Benson Gold also coauthored this post. 

On June 30, the U.S. Supreme Court handed down a ruling that has the potential to undermine an important provision of the Affordable Care Act (ACA) that establishes for women a federal guarantee of coverage for their full range of contraceptive methods, services, and counseling without any out-of-pocket costs. This guarantee is administered through private health plans, whether purchased in the individual market or made available through the insurers and plan administrators that provide group coverage.

The 5-4 ruling in Burrell v. Hobby Lobby Stores, written by Justice Samuel Alito on behalf of the Court’s conservative bloc, held that closely held for-profit corporations that assert a religious objection to some or all forms of contraception cannot be required to include such coverage in the health plans they sponsor for employees and their families. As emphasized by Justice Ruth Bader Ginsburg in her dissent (joined in whole by Justice Sotomayor and in part by Justices Kagan and Breyer), the Court’s decision could have serious and widespread consequences.

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Encouraging Nonprofit Hospitals To Invest In Community Building: The Role Of IRS ‘Safe Harbors’


February 11th, 2014

Hospitals as public health actors. A notable development in public health policy is the growing emphasis on community health improvement as part of the community benefit activities required of nonprofit hospitals that seek federal tax exempt status under §501(c)(3) of the Internal Revenue Code. Key industry leaders, such as the Catholic Health Association, have sought to increase the role of hospitals as public health actors. A report by the Hilltop Institute recognizes the potential link between hospitals’ community benefit expenditure activities and community health and describes states that have sought to involve hospitals in health planning to improve public health.

Two important policy developments have breathed further life into the effort to emphasize public health investments as part of a community benefit strategy. This post reviews these policy advances and proposes that the Internal Revenue Service (IRS) establish “safe harbors” describing in advance certain evidence-based investments by nonprofit hospitals in their communities that will automatically count as required community benefit activities.

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Against All Odds: What One Family’s Experience Tells Us About Medicaid’s Enduring Role


September 27th, 2013

Medicaid is nearly 50 years old. Is it a relic of a different era that should be repealed and replaced, or does its importance endure?

Ann Yurcek’s moving “Narrative Matters” essay in the September issue of Health Affairs demonstrates Medicaid’s vital role in health care. Re-imagined a quarter century later, her story underscores just how much this vital role endures. Indeed, Becca Yurcek’s very life is emblematic of the degree to which Medicaid goes where other payers fear to tread.

Ann’s Story

The events Ann Yurcek relates began nearly 25 years ago in 1989.

For readers familiar with Medicaid’s role in American life — especially its role in that incredible space in which health and disability policy intersect — Becca’s story is hardly uncommon. It started with young parents of a healthy and growing family, who were struggling to make ends meet even as a new baby was on the way. The father had begun a new job, but as a result of the peculiarities (a polite term under the circumstances) of the pre-reform insurance system, he was forced to pay for COBRA coverage at his old job even as he paid premiums at the new job — the new employer-sponsored health plan refused to cover Ann.

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A Lost Opportunity For Persons With Disabilities? The Final Essential Health Benefits Rule


March 11th, 2013

Among its myriad elements, the Affordable Care Act contains a breakthrough provision that, if implemented, could dramatically alter the way that health insurance coverage works for persons with disabilities. [PPACA § 1302(b)(4)(B)] This provision applicable to health insurance products sold in the individual and small group markets and therefore subject to the essential health benefits (EHB) coverage standard, requires the Secretary of Health and Human Services to bar the use of insurance coverage rules that discriminate on the basis of disability. See

However, final EHB rules issued on February 20th, 2013 effectively leave this ban unimplemented. A draft CMS document made available to the public on February 21 by Inside Health Policy suggests that the agency will monitor qualified health plans (QHPs) for potential discrimination. But the monitoring process suggested in the draft excludes any mechanism for detecting one of the most potent forms of plan discrimination, the use of benefit designs and coverage determination procedures that cause the denial of coverage for children and adults whose disabilities prevent them from “recovering” from their disability. Whether the ACA protections are left unimplemented remains to be seen.

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The Administration’s Decision On Partial Medicaid Implementation: True To The Law


December 19th, 2012

Ever since the United States Supreme Court decided NFIB v Sebelius in June 2012, all eyes have focused on the question of how the Obama Administration would interpret the Court’s blockbuster ruling on the constitutionality of the Affordable Care Act’s Medicaid expansion. On December 10, 2012, the Administration answered the question as part of a lengthy series of “Frequently Asked Questions (FAQs)” published by the Centers for Medicare and Medicaid Services (CMS). Buried near the end was the following:

26. Can a state expand to less than 133% of FPL and still receive 100% federal matching funds?

A. No.

Of course, the Administration’s answer is hardly so abrupt, although it is quite brief, taking only two paragraphs. But it is thorough, well reasoned, and consistent both with the text and structure of the Affordable Care Act (ACA) and with HHS’ other interpretations of the ACA and the underlying Medicaid statute.

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Will Increased Transparency Requirements For Nonprofit Hospitals Bring Greater Community Health Investments?


October 24th, 2012

Sweeping reforms implemented by the IRS and Treasury in 2009 have pulled back the veil surrounding the community benefit investments required of all nonprofit hospitals seeking federal tax exempt status. Will this new transparency, in combination with important tax law reforms enacted by Congress as part of the Affordable Care Act, lead to greater hospital investment in community health?

The Evolution Of Community Benefit Law

Since the 1950s, federal tax law has recognized that in order to qualify for tax-exempt status, nonprofit hospitals owe certain duties to the communities they serve. IRS Revenue Ruling 56-185 (1956) established a “financial ability” standard that required charitable hospitals to be “operated to the extent of [their] financial ability for those not able to pay for the services rendered and not exclusively for those who are able and expected to pay.” In 1969, this early ruling was amended by Revenue Ruling 69-545, which substituted a more amorphous “community benefit” standard that has essentially survived into the present time, although with important modifications under the Affordable Care Act.

As noted by the Joint Committee on Taxation, the express purpose of Revenue Ruling 69-545 was to eliminate any enforceable obligation on the part of tax-exempt hospitals to furnish financial assistance to indigent inpatients. Following an unsuccessful legal challenge to the validity of the ruling (Eastern Kentucky Welfare Rights Organization v Simon, 370 F. Supp. 325, 338 (D.D.C. 1973), rev’d, 506 F.2d 1278 (D.C. Cir. 1974), vacated on other grounds, 426 U.S. 26 (1976)), the community benefit standard remained moribund and essentially went unexplored for decades.

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CBO’s Updated Affordable Care Act Estimates: Resting On Shaky Assumptions?


July 31st, 2012

On July 24th, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) released updated estimates that project the budgetary impact on the Affordable Care Act of the United States Supreme Court’s decision in NFIB v Sebelius. In NIFB, the Court ruled that the federal government could not remove all […]

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The Supreme Court’s Medicaid Ruling: ‘A Shift In Kind, Not Merely Degree’


June 28th, 2012

This is a day to think about the Constitutional, rather than the practical, implications of the Patient Protection and Affordable Care Act.  Nonetheless, the hallmark of the remarkable decision handed down today is the degree to which it navigates multiple political and ideological currents in order to create and hold a majority for the constitutionality […]

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Sara Rosenbaum: Trying To Make Sense Of The States’ Medicaid Coercion Arguments


March 28th, 2012

Despite Paul Clement’s brilliant representation of his clients throughout the oral arguments, the coercion doctrine itself that remains murky. Furthermore, whatever the doctrine might mean, its application to the Affordable Care Act’s Medicaid expansion appears to have raised grave doubts in the minds of many of the Justices.

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Sara Rosenbaum On SCOTUS Day Two: Rashomon On The Potomac


March 27th, 2012

In Rashomon, the classic film exploration of truth, director Akira Kurosawa offers a meditation on the degree to which point of view colors reality.  A Rashomon of sorts played out during the second day of Supreme Court oral arguments on the Affordable Care Act.  For reasons that are not entirely clear other than pure sensationalism, […]

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Sara Rosenbaum On Day One Of The SCOTUS Health Reform Arguments: What Was That Medicaid Discussion?


March 26th, 2012

As has been widely reported, a sea of skepticism from all points on the Supreme Court’s ideological spectrum greeted arguments by Robert Long, who had been designated as the Court-appointed defender of the position that the Anti-Injunction Act (AIA), 26 U.S.C. § 7421(a), bars a pre-penalty challenge to the Affordable Care Act’s minimum essential coverage […]

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The Misleading Arguments In The States’ Medicaid Coercion Brief


January 19th, 2012

On January 10th, the states filed their latest arguments in their bid to have the ACA’s Medicaid expansion declared an unconstitutional coercion.  Following an effort to piece together a coercion doctrine from dicta found in a handful of Supreme Court cases, the states assert that the “[t]he ACA is Premised on the Understanding that It […]

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The States’ Medicaid ‘Coercion’ Claim: More Rhetoric Than Fact


December 14th, 2011

Among the issues on which the United States Supreme Court has agreed to hear oral arguments in the Affordable Care Act cases is the question of whether its minimum Medicaid coverage requirements are constitutional. The states have based their appeal on a legal theory known as the “coercion doctrine.”  Citing a long history of precedents, […]

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The Douglas Case: Pulling Back The Curtains On Federal Medicaid Enforcement


October 11th, 2011

Editor’s Note: Can Medicaid enrollees and providers sue a state in federal court for failing to pay provider reimbursement rates allegedly required by federal law? In very brief summary, this is the question before the Supreme Court in Douglas v Independent Living Center of Southern California. Below, Sara Rosenbaum offers her analysis and viewpoint regarding […]

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‘Medical Necessity’ Definition Threatens Coverage For People With Disabilities


September 16th, 2011

One of the great advances for people with disabilities under the Patient Protection and Affordable Care Act is its coverage standards for the individual and small group markets.  To be sure, the Act’s best known provisions where disability is concerned are those that bar insurers from totally denying access for people with higher health care […]

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The Women’s Preventive Services Report And The Role Of Evidence


July 21st, 2011

Section 1001 of the Affordable Care Act establishes women’s preventive health benefits as a new mandatory coverage class for all insurance products sold in the individual and group markets, self insured employer-sponsored health plans, and benchmark plans enrolling newly eligible Medicaid beneficiaries.  In implementing the Act in accordance with the tight deadlines established under the […]

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SCHIP: A Falsely Politicized Debate


August 16th, 2007

One of the more peculiar aspects of life in Washington D.C. is the politicization of policy problems, to the point that the political framing effort hopelessly distorts the matter at hand. The 2007 debate over the reauthorization of the State Children’s Health Insurance Program is turning out to be a classic example of this phenomenon. […]

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