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A floor-and-trade proposal to improve the delivery of charity-care services by U.S. nonprofit hospitals

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Abstract

Many uninsured Americans rely on charity care provided by nonprofit hospitals, which receive substantial tax benefits in exchange for providing community benefits. In this discussion paper we show that the hospitals that receive the largest tax benefits tend to be located in wealthier communities, whereas the demand for uncompensated care is highest in poorer communities. To ameliorate this geographic mismatch between the supply of charity care and the demand for charity care, we propose a floor-and-trade system whereby nonprofit hospitals would be required to meet charity-care standards, either by providing care to local patients or by purchasing credits from other hospitals. We explain how state governments can best implement our proposal while tailoring the plan to their specific needs.

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