Medicare Losses

Question: Why are Medicare shortfalls (losses) not counted as a community benefit?

Recommendation: CHA recommends that hospitals not include Medicare losses as community benefit. The reasons for this are as follows:

  • Serving Medicare patients is not a differentiating feature of tax-exempt healthcare organizations. There are for-profit specialty hospitals that specifically focus on attracting patients with Medicare coverage, e.g., specialty heart and orthopedics facilities.
  • The CHA community benefit framework allows community benefit programs that serve the Medicare population to be counted in other categories. If hospitals operate programs for patients with Medicare benefits that respond to identified community needs, generate losses for the hospital, and that meet other criteria, these programs can be included in the CHA framework in Category C as "subsidized health services."
  • Significant effort and resources are devoted to assuring that hospitals are reimbursed appropriately by the Medicare program. The Medicare Payment Assessment Commission (MedPAC) carefully studies Medicare payment and the access to care that Medicare beneficiaries receive. MedPAC recommends payment adjustments to Congress accordingly.
  • Medicare losses are different from Medicaid losses which are counted in the CHA community benefit framework because Medicaid reimbursements generally do not receive the level of attention paid to Medicare reimbursement. Medicaid payment is largely driven by what states can afford to pay.
  • Not including Medicare losses makes the overall community benefit report more credible given the above reasons.

Medicare losses can be reported on the IRS form 990 H (Part III) and in other reports, but not as community benefit.

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.