Minnesota State Rep. Steve Elkins introduced legislation on May 13 to redirect revenue from an existing healthcare tax back to hospitals to expand charity care programs for patients unable to afford their medical bills. The proposal was filed in the final days of the legislative session.

The state collects about $250 million per year from a 1.56% tax on hospital patient revenue, according to estimates by the Minnesota Department of Health. Hospitals spent $241 million on charity care in 2024, according to the same estimates.

"Hospitals are providing a fair amount of charity care, but they kind of have an obligation to do something more than they are doing," Elkins said. He said he intends to reintroduce the proposal next year if it does not make it into the state's health budget this session.

A Minnesota Star Tribune-KFF Health News investigation found that Minnesota hospitals spend a smaller share of their operating budgets on charity care than hospitals in other states and that they set differing guidelines for who qualifies for free or discounted care. A lack of state standards allows some hospitals to limit free care to people making less than $15,000 in annual income, while others offer free care to individuals living alone with incomes up to $47,000. Hospital systems decide the income and financial thresholds by which patients qualify for financial assistance in the form of free care or partial discounts.

"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," said Eli Rushbanks, director of policy advocacy for Dollar For, a nonprofit that helps U.S. patients apply for charity care. "Minnesota has charity care-eligible patients who are not receiving charity care," he said.

Recent reports by the Lown Institute and Minnesota's legislative auditor indicate some hospitals gain more in nonprofit tax benefits than they spend on community benefits, including charity care. A legislative audit found that 28 Minnesota hospitals spent less on community benefits than they saved in taxes in 2023 when Medicaid underpayment was included in the total. When underpayment and research and education expenses are excluded, 62 hospitals spent less on the remaining community benefits than they gained in tax benefits as nonprofits.

The Minnesota Hospital Association would prefer to see the hospital tax disappear. Newly released financial data shows 31 Minnesota hospitals meet the state's definition of financial distress because they lost money on operations in four of the last eight years. Hennepin County Medical Center in Minneapolis is poised for a $205 million state bailout this year to prevent the urban trauma center from closing. The facility provided the most charity care of any Minnesota hospital in 2024, an estimated $88 million, which consumed more than 3% of its operating budget, and it has a process for automatically screening patients for financial needs upon admission. Elkins said he suspects some charity care patients from other hospitals are being diverted to Hennepin County Medical Center.