When a hospital writes off a patient's bills as a tax write off, does that mean that tax payers payed?

Question

I'm not sure how all of this works. My grandmother was uninsured before she passed away. She had many medical bills & the hospital finance department told me that the hospital has a certain amount of bills that they can write off each year, so they wrote off my grandmother's bills. Does this essentially mean that tax payers are paying her bills? Or is it some sort of agreement that the government has with the hospital?

I hope this makes sense.

busterwasmycat · Answer

Hospitals work on a balance sheet.  they require a certain income to pay for all the services that they provide, plus any profit (most are profit-making enterprises).  So, if they have 5% of service costs that they cannot collect, they make up for those losses (which they expect and plan for) by charging more for everything than they would otherwise do.  Thus, all those people who actually pay for their services pay a little more than they otherwise would.  All users pay for the unpaid services.  Depending on how much of the services are unpaid determines how much more each person has to pay (proportionately).

The major payers of hospital services are insurance companies.  Thus, the insured folks pay more for their insurance because they will claim more from the insurers than they would if people all paid.

Everyone pays for the uninsured or the defaulters on payments. It is not the government, except in the sense that the government is being the insurer (like with medicare) and in terms of lost income or business tax.  The hospital only pays "income" tax on earnings, but generally speaking they plan on a certain level of earnings and adjust their rates to ensure that level of profit, so there really isn't a loss to the government on the tax side.  the profit comes from the people who pay.

It is like any business loss.  the loss has to be paid for by profits in other sales or the company will go out of business.  We all pay more for clothing, say, at Walmart because of shoplifting.  Same basic thing.

lare · Answer

sadly no.  When Ronald Reagan enacted the federal legislation that requires hospitals to accept patients irregardless of their ability to pay, he provided no method to pay for that.  the term is "unfunded Mandate" if you are into politics and Reagan used a number of unfunded mandates so as to give the appearance that no new taxes were created by his administration.

so the unfunded expenses becomes an overhead cost of business for the hospital, which is paid for by increasing its charges to paying customers, mostly insurance companies.  i saw a PBS interview once with the CEO of Blue Cross who said that they could reduce insurance premiums by 20% if universal insurance coverage by Obamacare meant an end to non-paying health care customers.

now you understand why older people love Medicare, and it is a shame your Grandmother was not covered.

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When a hospital writes off a patient's bills as a tax write off, does that mean that tax payers payed?

2 Answers