Reductions in Tax Incentives Potentially 'Devastating' to U.S. Healthcare

Lingering uncertainty over the sweeping healthcare reforms, federal and state budget cuts for social services, and trimming tax breaks for charitable giving as part of a deficit reduction strategy could severely impact nonprofit healthcare providers, a new survey from the Association for Healthcare Philanthropy shows.

"Combined with growing state and federal cuts in funding for social services and uncertainty over implementation of the Patient Protection Act, these draconian tax proposals—if enacted—add up to a triple threat to America's not-for-profit healthcare providers," said AHP President/CEO William C. McGinly. "This is not the path to take as we recover from the recession."

President Obama's proposed 2012 budget caps charitable deductions at 28%, while a Bowles-Simpson Deficit Reduction Commission proposal would reduce the tax incentive for charitable giving to a 12% tax credit for donations that exceed 2% of a taxpayer's adjusted gross income.

Nine out of 10 AHP respondents surveyed in February said the Bowles-Simpson proposal would cause significant reductions in overall giving to their organization, with 64% saying the adverse impact on major gift-giving would be considerable. About 40% said giving would fall between 10% and 30% if significant changes are made to the current tax incentives for charitable donations—which conservatively could amount to more than a $1.07 billion drop in total annual giving to nonprofit hospitals, AHP said, based on its own FY2009 statistics.

AHP Chair Mary Anne Chern said any reductions in the tax incentives for charitable giving could be "devastating for healthcare in the U.S."

"More than 60% of fundraisers believe that tax code changes will reduce donations, and most predict that reduced funding will impede buying much-needed hospital equipment and paying for hospital improvements and expansions, during a time when our communities' healthcare needs are increasing and the demands on nonprofit hospitals continue to grow," said Chern, who is also president of White Memorial Medical Center Charitable Foundation in Los Angeles. "These concerns are being expressed by fundraisers who work on behalf of a wide range of healthcare institutions, including local community hospitals, medical centers, medical schools, children's hospitals, nursing homes and assisted living facilities."

Survey respondents talked about the domino effect on charitable fundraising that could come with tax code changes, the lingering impacts of the recession, and concerns over the implementation of the Affordable Care Act. One respondent wrote: "We have already experienced decreased giving from the effects of the economy and uncertainty over health care reform. This (tax code changes) would be another disincentive for people to give."

McGinly said most donors don't give because of a tax break, but that adverse tax consequences affect the amount of the gift. "This is especially true of major gifts and planned giving, where donors consider the impact on their tax liability," he said. "These tax code changes would compound the current fiscal problems that most nonprofit hospitals face, particularly for healthcare providers serving in-need communities, where in some cases nearly 50% of the patients rely on charity care or some form of assistance beyond what federal and state programs provide."

AHP is a not-for-profit organization whose more than 4,700 members direct philanthropic programs in 2,000 of North America's not-for-profit healthcare providers. The survey may be downloaded here.