Health Affairs

Health Affairs, 25, no. 4 (2006): w304-w307 (Published online 20 June 2006) doi: 10.1377/hlthaff.25.w304 © 2006 by Project HOPE	New Online   Getting Health Reform Done   After the State of the Union   Incremental Reform   E-Health in Developing World   Most-Read Articles in 2009

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Tax Preferences For Nonprofits: From Per Se Exemption To Pay-For-Performance

M. Gregg Bloche

Defenders of tax preferences for nonprofit hospitals and health plans, including Mark Schlesinger and Brad Gray, contend that nonprofits deserve government support because they provide greater "community benefit" than their for-profit counterparts. This argument is unconvincing. There is some evidence that nonprofits deliver marginally more "community benefit" but no evidence that tax exemption is the cause. Absent proof that tax expenditures, including exemption, "buy" social benefits that are worth the cost to taxpayers, these expenditures are unjustified. The better course would be to pay nonprofits for performance, by tying tax benefits to accomplishments (beyond current achievements) in health promotion, quality, and care for the needy.

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