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Tax Reform Needed to Help Rural Health Crisis

Rural America suffers from critical health care shortages, exacerbated by the ever-growing rural hospital closure crisis. Two targeted tax policies will go far in stabilizing fragile rural health care safety net providers.
1. Tax Credits to Improve Rural Health Workforce Shortages

The ProblemHealth care worker shortages plague rural America. Twenty percent of the population lives in rural communities, yet only 9% of physicians practice in these areas. Health care provider shortages of all types (physician, nursing, mental health provider, dental health provider) exist. Rural areas experience significant problems in recruiting and retaining an adequate health care workforce. These issues for rural health care providers are compounded by the disparity in federal and state reimbursement for rural providers and facilities in spite of the fact that these providers clearly serve as the safety net for our impoverished rural communities nationwide.

The Solution:  Tax incentives to encourage health providers to practice in medically underserved rural communities: Tax incentives that provide a credit or a deduction for medical loan repayment will go far in attracting a workforce in critically underserved rural communities. Some states have already implemented successful state programs to address this need. For example, health care professionals in Kansas may receive up to $20,000 in repayment assistance working in a Health Professional Shortage Area for two years. A national tax incentive will build upon effective state programs and address the national need, as well as build upon legislation introduced in the House, such as H.R. 2042, the Frontline Health Care Act of 2017, which would amend the Public Health Service Act to direct the Department of Health and Human Services (HHS) to establish a Frontline Providers Loan Repayment Program.

2. Tax Deductions for Escalating Bad Debt Accrued by Rural Hospitals 

The Problem: Bad debt for both Medicare and Medicaid has risen by nearly 50 percent among rural hospitals since the Affordable Care Act was signed into law, according to a June 2016 report of the Rural Health Care Research program: Bad debt is the amount of money owed to a hospital by patients who cannot pay their bill. Private-payer bad debt has also risen significantly, yet the ability for rural hospitals to be reimbursed for bad debt has been dramatically cut by Congress.
As a result, 41% of rural hospitals are operating at a financial loss, and rural hospital closures are escalating.Why is bad debt escalating for rural hospitals?In part because many states have not expanded Medicaid; additionally, rural Medicare beneficiaries are proportionately poorer than their urban counterparts and have difficulty paying copays; and, finally, because rural Americans often purchase high deductible plans on the ACA exchange and cannot afford their deductible.As one rural hospital CEO said, “When you go from no insurance, to a high deductible plan, you may as well have no insurance.”The result is that rural hospitals must absorb the loss and subsidize the cost of patient care.
The Solution: A tax deduction for accrued bad debt: This will be of enormous benefit to hospitals who file tax returns.  Such a deduction will lessen the rural hospital closure crisis for small, for profit rural hospitals. 

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