WASHINGTON -- President Clinton's health care reform bill would require the states to issue taxable rather than tax-exempt debt to finance the bailout of doctors and hospitals participating in failed health provider plans.

A section of the bill entitled "Denial of tax-exempt status for borrowings of health care-related entities" makes it clear that borrowings by the state guaranty funds would be treated as taxable private activity bonds under the tax laws.

The same part of the bill would also treat as taxable private activity bonds any cash-flow borrowings by the regional health alliances that the states would have to set up to pool the health-care purchasing power of most state residents.

The states are required under the bill to set up both the guaranty funds and the regional alliances as state agencies or nonprofit corporations. The mission of the guaranty funds is to ensure that doctors and hospitals providing the universal medical benefits guaranteed under the legislation are reimbursed for such services even if the health plan they participate in becomes insolvent.

The regional alliances, besides pooling the purchasing power of state residents, would negotiate with the health provider plans to offer guaranteed benefits at close to the average premium rate within their region.

The provision barring tax-exempt status for the borrowings of both kinds of health-care organizations would become effective upon enactment of the bill.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.