WASHINGTON -- The House Ways and Means Committee approved health care reform legislation yesterday that does not contain any major tax-exempt bond provisions.

The committee's bill will be sent to the Rules Committee after Congress returns on July 11 from its Independence Day recess, tax aides said.

The Rules Committee is expected to combine the tax committee's bill with heath care measures approved by other House committees to produce one massive health care reform bill that will be sent to the House floor for a vote.

The Senate Finance Committee, meanwhile, was moving forward late yesterday on a health care reform bill proposed by Sen. Daniel Patrick Moynihan, D-N.Y., that would repeal the $150 million volume cap on the outstanding debt of 501(c)(3) organizations.

The bill would also ease some of the current tax law restrictions on 501(c)(3) bonds so that these bonds are put more on a par with tax-exempt governmental bonds.

Finance committee members were trying to complete their work on the bill before the Independence Day recess, with Moynihan threatening to have the committee meet tomorrow if necessary.

The bill approved by the House Ways and Means Committee yesterday, as expected, did not contain any proposals to ease the $150 million cap.

Two members of the panel had been poised to offer amendments that would repeal the $150 million cap on the outstanding debt of nonhospital health care organizations, but those amendments were dropped Wednesday partly because of their high cost.

The committee's bill would set new requirements that a 501(c)(3) health care organization would have to meet to obtain tax-exempt status.

Under the requirements, which are tougher than those proposed by the Clinton Administration and Moynihan, a health care organization could not obtain 501(c)(3) status unless it:

* Provides "qualified outreach services" in medically underserved areas at lower than cost to poor individuals or at specialty emergency care facilities that normally operate at a loss;

* Annually assesses the heath care and qualified outreach service needs of the community and develops and discloses a written plan to meet those needs;

* Avoids discriminating in providing health care services to individuals that are covered by government-sponsored health plans such as Medicare and Medicaid;

* Provides emergency health care services that do not discriminate against a patient's ability to pay;

* Is governed by an independent board of directors for which at least 80% of the directors are outsiders and not officers, staff, or doctors receiving compensation from the organization; and

* Does not discriminate against patients that cannot pay for nonemergency services.

In addition, the bill would allow the Internal Revenue Service to impose excise taxes, as an alternative sanction to revoking the tax-exempt status of the organization and its bonds, for the failure to meet these requirements.

The IRS could also apply excise taxes for violations of the tax law's prohibition on inurement -- the enrichment of officials or other socalled insiders that are in a position to influence the health care organization.

The bill's alternative sanction provisions are tougher than those proposed by the Treasury Department or Moynihan.

The Ways and Means Committee's bill would also create an Essential Community Provider program to help areas with insufficient access to health care services. Under this program, the federal government could provide interest rate subsidies for projects involving tax-exempt financing. But the subsidies could not take the form of a federal guarantee, said one tax aide.

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.