Potential Increase in Tax Credit
Georgia lawmakers may consider boosting the state’s annual tax credit for rural hospitals from $60 million to $100 million when the new legislature arrives for work in January.
The effort to bring more money to financially struggling rural hospitals is commendable, but evidence points to greater financial benefits for rural hospitals and a higher return on investment by focusing instead on putting an insurance card in the pocket of every Georgian.
Overview of the Rural Hospital Tax Credit
Launched in 2017, the rural hospital program offers a tax credit to individuals or corporations that donate to a qualifying rural hospital designated by the state health agency.
Evolution of the Program
- Originally set at 70% of the donation amount.
- Increased to 90% when donations through the program did not reach the cap.
- Recently increased to 100% of the donation amount.
With donors now receiving a dollar-for-dollar match on their contributions to qualified hospitals, the program quickly reached its ceiling this year. The total cost of the program is currently limited to $60 million a year until 2021.
Hospital Participation and Impact
- 58 eligible hospitals
- Each can receive up to $4 million a year through the program.
- The Georgia Department of Community Health has not released official data on which hospitals have benefited or to what extent.
- Media reports suggest donations range from $543,000 to $1.4 million.
- Some hospitals, like Miller County Hospital, received as little as $2,000 this year.
Comparison to Medicaid Expansion
Evidence from other states shows that expanding Medicaid brings rural hospitals larger financial benefits:
Key Data Points
- States that expanded Medicaid saw the average rural hospital revenue increase by 33%, or approximately $2 million a year.
- At the 2018 Rural Healthcare Symposium held at the University of Georgia, Vicki Lewis, CEO of Coffee Regional Medical Center, estimated expanded Medicaid would mean about $3.5 million a year for her hospital.
Financial Considerations
Increasing state spending on the tax credit from $60 million to $100 million would come closer to the net costs of expanding health coverage.
- Georgia lawmakers have rejected Medicaid expansion, citing cost concerns.
- Georgia remains one of 17 states that have not expanded Medicaid.
Cost vs. Return
According to GBPI estimates, the net cost to the state would be around $136 million a year if Georgia expanded Medicaid in 2018. This accounts for increased revenues from:
- Insurance premium taxes
- Income taxes
- Sales taxes
That state investment would be matched with about $3 billion in federal money each year, offering a strong 9-to-1 return on investment.
By contrast, the rural hospital credit brings zero federal match.
Ongoing Rural Health Care Crisis
Rural Georgia continues to face a health care crisis:
- Seven rural hospitals closed since 2010.
- Others are facing financial challenges due to factors like:
- Changes in the health care industry
- Health insurance payment rates
- Local population decline and aging
Uncompensated Care
One significant source of financial instability is uncompensated care—services provided without payment due to patients’ inability to pay.
- Often, these patients lack insurance coverage.
- Georgia ranks fourth-highest among states for uninsured rates.
- The uninsured rate in Georgia increased slightly in the past year.
- The Georgia Chamber of Commerce estimates the uninsured rate in rural Georgia will increase to 25% by 2026.
Evaluating Investment Priorities
Investing additional money in the rural hospital tax credit program does not reduce the growing number of uninsured Georgians.
Spending towards expanded health coverage has the potential to provide greater benefits to rural hospitals than the current tax credit program.
As lawmakers consider increasing the rural hospital tax credit, it is worth considering directing those funds toward putting insurance cards in more Georgians’ pockets for a stronger return on the state’s investment.
Frequently Asked Questions
How does the Rural Hospital Tax Credit benefit donors?
The Rural Hospital Tax Credit allows Georgia taxpayers to receive a 100% state income tax credit for contributions to eligible rural hospitals. This means donors effectively redirect their tax payments to support healthcare in underserved areas.
Are there limits to how much I can donate under this program?
Yes, individual donors can contribute up to $5,000, while married couples filing jointly can donate up to $10,000 annually. S corporations and LLCs have similar limits, while C corporations can donate up to 75% of their Georgia tax liability.
Why are rural hospitals in Georgia struggling financially?
Multiple factors contribute, including a high uninsured rate, low insurance reimbursements, aging populations, and increasing healthcare costs. Many patients are unable to pay for care, resulting in significant uncompensated treatment burdens.
What is the difference between the tax credit and Medicaid expansion?
The tax credit supports hospitals through private donations, while Medicaid expansion provides substantial federal funding to help cover uninsured patients. Expansion has shown to bring more sustainable revenue and stability to rural hospitals in other states.
Can the tax credit alone ensure the survival of rural hospitals?
While helpful, the tax credit alone cannot fully address rural hospitals’ financial challenges. Without federal support like Medicaid expansion, many facilities remain vulnerable to closures and service cuts.