Minnesota Lawmaker Proposes Redirecting Healthcare Tax to Boost Hospital Charity Care

Minnesota lawmakers are facing a dual challenge: sustaining financially struggling hospitals while addressing rising medical debt among patients. One state legislator has proposed a solution that redirects existing tax revenue to directly support hospital charity care programs.

Proposal to Redirect Healthcare Tax Revenue

State Rep. Steve Elkins has introduced legislation to use money from Minnesota’s 1.56% hospital tax on patient revenue to expand charity care programs. The tax generates approximately $250 million annually, nearly matching the $241 million Minnesota hospitals spent on charity care in 2024, according to the Minnesota Department of Health.

Elkins introduced the bill on May 13 during the final days of the legislative session. He argues that hospitals, which benefit from nonprofit tax exemptions, should do more to support patients who cannot afford care.

“Hospitals are providing a fair amount of charity care, but they kind of have an obligation to do something more than they are doing.”

— State Rep. Steve Elkins

Financial Distress and Charity Care Disparities

Recent reports, including analyses by the Lown Institute and Minnesota’s legislative auditor, found that some hospitals receive more in tax benefits than they spend on community benefits, including charity care. Elkins emphasized that simply demanding more from hospitals may not be the solution.

Financial data released this year shows that 31 Minnesota hospitals meet the state’s definition of financial distress, having lost money on operations in four of the last eight years. Among them is Hennepin County Medical Center (HCMC) in Minneapolis, which is set to receive a $205 million state bailout this year to prevent the closure of its urban trauma center.

In 2024, HCMC provided an estimated $88 million in charity care, consuming over 3% of its operating budget—the highest amount of any Minnesota hospital. Elkins suggested that some patients denied charity care at other hospitals may be diverted to HCMC, which screens patients for financial need upon admission.

Inconsistent Charity Care Standards

A lack of state standards has led to wide disparities in charity care eligibility. Some hospitals limit free care to individuals earning less than $15,000 per year, while others extend assistance to those earning up to $47,000 annually.

Eli Rushbanks, director of policy advocacy for Dollar For, a nonprofit assisting patients with charity care applications, highlighted the inefficiency of aggressive debt collection. “It’s not really a question of whether they are doing better than other states. It’s a question of whether they are doing enough for Minnesota’s patient population,” Rushbanks said. “Minnesota has charity care-eligible patients who are not receiving charity care.”

Potential Impact and Next Steps

Elkins’ proposal aims to incentivize hospitals to increase their charity care contributions, reducing the burden on facilities like HCMC and easing medical debt for patients. The legislation reflects broader concerns about healthcare affordability and hospital sustainability in Minnesota.