Tag Archives: poverty

7 Paths to Development That Bring Neighborhoods Wealth, Not Gentrification

Featured art via Sarah Oberlin/ Yes Magazine

The plan to build better, more connected, flourishing communities is here—and it won’t require putting a Starbucks on every block.


In cities across the nation, a few enjoy rising affluence while many struggle to get by.

An August 2015 study by The Century Foundation reported that—after a dramatic decline in concentrated poverty between 1990 and 2000—poverty has since reconcentrated. Nationwide, the number of people  living in high-poverty ghettos and slums has nearly doubled since 2000. This situation is created in part by the practices of traditional economic development, which prioritize corporate subsidy after corporate subsidy over the needs of the local economy. Current trends threaten to worsen, unless we can answer the design challenge before us.

Can we create an economic system—beginning at the local level—that builds the wealth and prosperity of everyone?

Economic development professionals and mayors are working in partnership with foundations, anchor institutions, unions, community organizations, progressive business networks, workers, and community residents. What’s emerging is a systems approach to creating an inclusive, sustainable economy where all can thrive. The work is place-based, fed by the power of anchor institutions, and built on locally rooted and broadly held ownership. It’s about building community wealth across the United States—in more places than most would imagine, a new kind of economy is beginning to appear. It’s an economy that, because of its fundamental design, tends naturally to create inclusion and prosperity for many, not simply for the few.

If globalization is the hallmark of today’s mainstream economy, relocalization is the hallmark of the alternative.

The answers are beginning to appear in cities nationwide—in the tools and approaches of community wealth building, as they are wielded by cutting edge city economic development professionals. This work is only beginning to be widely recognized as a  cohesive field. Yet as this report shows, it is in fact a coherent, systemic approach to economic development—one that embodies a powerful set of common drivers, and offers a broad set of powerful strategies.

Building a place-based economy

Traditional economic development is too often captured by the demands of major corporations and site development consultants. The place that drives such players is in reality no place at all, for they embody a worldview of a generic, commodified economy, where firms are objects to be lured from place to place by the $80 billion in incentives given annually by cities, states, and counties.

The system that is supported in this way is one of wealth inequality, where most assets are owned by the few. The ownership driver is absentee ownership, with most incentives flowing to corporations owned outside the community. Inclusion is lacking, with benefits flowing to a financial elite—since ownership of publicly traded firms is overwhelmingly concentrated among those in the top 10 percent of society.

A real place is more than a free market of footloose players...

Inadvertently, but pervasively, incentives tend to neglect local firms, which can too often be driven out of business. Thus traditional approaches operate the multiplier effect in reverse: Taxes are extracted from local firms and residents and given to corporations whose ownership is not local, even as local schools and parks suffer cuts in funding. Missing throughout is the driver of collaboration, with little transparency or democratic public input into development decisions.

In its workforce drivers, traditional economic development focuses on counting the number of jobs created, but too rarely tallies whether these are living-wage jobs, or whether they go to those with barriers to employment. Traditional approaches also fail to subtract jobs destroyed when Main Street retailers quietly close their doors—or when firms outsource manufacturing and other work abroad, or move operations out of the community.

The mindset missing in traditional approaches is commitment to place, and a recognition that economic entities can be designed to benefit community.

More than a label, community wealth building is also a framework. It has multiple drivers that work together to create a system that delivers the outcome sought: an inclusive, sustainable community economy where all can  prosper—particularly those normally excluded. This system can be defined as having seven key drivers.

1. Place

Community wealth building begins with loyalty to geographic place. If globalization is the hallmark of today’s mainstream economy, relocalization is the hallmark of the alternative. Globalization works well for capital, which can move across borders with a computer keystroke. But the real economy of jobs and families and the land always lives someplace real. The real economy is place-based. And a real place is more than a free market of footloose players, where firms are like objects that can be moved anywhere.

In contrast to luring companies from elsewhere, building community wealth is about developing underutilized local assets of many kinds—social networks, the built environment, cultural riches, local ecology, anchor institutions—and doing so in a way that the wealth stays local and is broadly shared. When families possess assets—skills, social networks, a home, savings, an ownership stake in a business—they are better able to withstand shocks like unemployment or illness. They can plan for their future, send a child to college, and feel secure in retirement. A job may start or stop. Assets yield greater stability and security. As Boston’s John Barros told us, “It takes a job to get out of poverty, but it takes assets to keep you out of poverty.”

What’s true for families is true for communities. Jobs may be drawn into a community but leave without warning. “There’s nothing worse than a company that you‘ve worked with for ten years just leaving because the incentives wore off,” said Tracey Nichols of Cleveland. “But having the community own the enterprise, it will always be there.”

2. Ownership

Ownership of assets is the foundation of every economy, for it determines who has control and who receives the lion’s share of benefits. Community wealth building deploys a whole spectrum of inclusive ownership models. At the non-inclusive end of the spectrum we see absentee-owned firms. Corporations with shares trading on public stock markets are inherently absentee-owned.

Inclusiveness has more of a chance with locally owned firms. When money is spent at locally owned firms, studies show that revenue recirculates locally at least three times as much. Local ownership is vital. But local ownership by a few wealthy families only gets us part of the way toward broad prosperity. More inclusive are firms owned by women and people of color, who have traditionally been excluded from asset ownership. Still another consideration is a longer time horizon. When local owners retire or sell, how do those firms stay local?

Social enterprises are likely rooted in community over the long term, for they have a primary mission of providing social benefit, and many are owned by nonprofits and unlikely to be sold. Also inclusive are firms with employee stock ownership plans (ESOPs), which allow founders to exit their ownership by selling to employees—who are likely to remain loyal to place over the long term, since employee-owned companies are typically locally owned. Still more inclusive are cooperatives, where all members have one share and one vote. Particularly valuable for job creation are worker-owned cooperatives, where workers are the ones who control the company and elect the board.

When employees not only have a job but an ownership stake, they enjoy greater control of their economic fate.

3. Multipliers

While ownership shapes the skeleton of enterprise, demand is its lifeblood. Community wealth building asks: Where is the large-scale demand that can drive the growth of local, inclusive enterprise? What kind of demand cares about place?

A critical force generating momentum for local enterprises is the purchasing power of anchor institutions, like nonprofit and public hospitals and universities, which are rooted locally and have missions of service. Other types of anchor institutions include museums, community foundations, and local government. When anchors deploy their economic power to strengthen local enterprises, especially inclusive enterprises, they are engaging in what The Democracy Collaborative has termed an “anchor mission.” An anchor mission consciously links the well-being of an institution and its community.

Support for an anchor mission has grown over the last decade among nonprofit hospitals and universities, which together represent well over $1 trillion in economic activity, about 7 percent of GDP.

The procurement, hiring, and investment practices of anchor institutions represent a potentially enormous source of economic development support, which cities like Cleveland, Chicago, Baltimore, and New Orleans are beginning to tap. For instance, when anchor procurement supports locally owned businesses, cities enjoy a powerful multiplier effect, keeping money circulating locally. Over the past decade, more than two dozen studies have shown that local businesses generate two to four times the multiplier benefit, compared to non-locally owned firms. As author Michael Shuman observes, that means that every dollar shifted to a locally owned business generates more income, more jobs, higher local tax revenues, and greater charitable contributions.

4. Collaboration

In traditional economic development, collaboration involves the two traditional players of city government and the private sector. Community wealth building is more broadly collaborative—involving nonprofits, philanthropy, anchor institutions, community residents, local businesses, and workers.

“What’s happening in New York City is fascinating, and I think it’s the way things might happen in the future,” Melissa Hoover, executive director of the Democracy at Work Institute, said. “What it looks like from the outside is that the City authorized $1.2 million for cooperative development [for 2015, increased to $2.1 million for 2016]. What really happened is that grassroots organizations had been working toward this for a long time.” The City’s allocation was encouraged by these nonprofits, and went to fund their work. The process, in short, was highly collaborative.

Among cities taking seriously the power of collaboration is Philadelphia. When the mayor in 2013 created a new anti-poverty office, the Office of Community Empowerment and Opportunity (CEO), the initiative embraced the philosophy of “collective impact,” said CEO Executive Director Eva Gladstein. In creating and implementing its action plan, CEO involved close to 200 stakeholders in meetings, focus groups, and interviews.

5. Inclusion

Inclusion lies at the heart of community wealth building, adding a driver lacking in much of economic development. Economic inclusion is the opening up of economic opportunities to previously underserved social groups. It requires creating targets and indicators—as well as participative processes—to ensure that disadvantaged individuals and communities can participate in a meaningful way in the economy.

Consider the seeming success of the innovation economy in Pittsburgh, a former Rust Belt city which in recent decades has enjoyed a resurgence in health care, education, and technology. The City now offers good white-collar jobs and cultural amenities. It’s seen as a “turnaround city,” William Generett, CEO of Urban Innovation21, told us. “But it’s been a very uneven transformation.” The poverty rate among working-age African-Americans remains the highest among the nation’s 40 largest metropolitan areas. “This population has not connected to the new economic drivers,” he said.

To spread the wealth of the technology sector to disadvantaged communities, in 2007 Generett created Urban Innovation21, a consortium of 20 businesses, nonprofits, and government organizations, using business incentives, grants, internships, and training programs. It’s the kind of experiment in inclusion that deserves emulation.

Urban Innovation21 has worked with unions and others to launch an employee-owned commercial laundry, still in development. It’s a wealth-building strategy that takes inclusion into the realm of asset ownership; as Generett said, it goes “beyond the traditional activities that have been used in low- and moderate-income communities,” such as low-income housing and social services.

Inclusion is both a moral imperative and an economic one. Research shows that areas extending greater economic opportunity to people of color enjoy longer periods of growth and shorter downturns. Inclusion is particularly powerful when combined with anchor strategies.

6. Workforce

If worker ownership is a key long-term goal of community wealth building, workforce participation is often a more immediate step toward prosperity. Economic development professionals serving an entire city do not have the luxury of focusing solely on ideal models. They face the tough job of helping those with barriers to employment find good work, and helping low-income workers move up.

Bringing a community wealth frame to workforce development means two things. First, adding a systems approach means linking training to the needs of employers and anchor institutions, and creating support services. Second, it means being intentionally inclusive—deliberately reaching out to communities of color and those with employment barriers.

University Hospitals (UH) in Cleveland, developed the Step Up to UH program to create a pipeline for hiring residents of neighboring low-income African-American communities. The program includes training and wraparound support services to ensure long-term success. A different systems approach to workforce development deploys anchor support for social enterprise. For example, the nonprofit Momentum in Minneapolis operates three social enterprise businesses that provide transitional employment and job training for those facing barriers to employment, such as felony convictions or substance abuse history.

7. System

Beyond time-limited programs, the aim of community wealth building is creating a new system. It does this by building institutions that stand over the long term, creating an ecosystem of support for a thriving local economy. This includes examples like New York City funding the ecosystem supporting cooperative development, Richmond creating a new Office of Community Wealth Building in city government, Cleveland launching a network of worker-owned companies, or North Dakota creating the state-owned Bank of North Dakota (BND). With the support of BND, locally owned banks of small and medium size have been able to extend their lending capacity; 83 percent of all deposits in the state, compared to 29 percent nationwide, are managed by community banks. Community banks, in turn, support local business—lending four times as much to small business as the national average.

These institutions are designed to support communities, not to extract profits from them. They show how—from enterprise ownership up to the banking system—we can design for the outcomes we desire.

The seven drivers of community wealth building work together. Starting with a devotion to a place, this approach builds on local assets of many kinds. At the heart of it all is an inclusive focus on the needs of low-income families, people of color, and those with barriers to employment. The end goal is a new system that helps broadly held community wealth to flourish.

This article was originally featured at Yes! Magazine. All art, including featured image, via Sarah Oberlin/YM.


Creating a Constituency for the News

Media consolidation has left many communities with a terrible lack of news service.

The news industry’s downturn has created another crisis: People across the country are finding it harder to get the information they need to participate in society and be engaged members of their communities.

The public loses the most when local news coverage disappears. According to the latest census from the American Society of Newspaper Editors, newsroom employment dropped by more than 10 percent in 2014 alone. And over the last 10 years, the number of newsroom jobs has plummeted 39 percent.

Empty Newsroom

Each of those lost jobs means one fewer journalist representing the public interest and holding the powerful accountable.

There’s often a real distance between journalists and the communities they’re supposed to serve. To make local reporting more viable and vibrant, it needs to consider perspectives from outside the news industry. That’s why Free Press started News Voices. Our new project will connect newsrooms and communities and build a collaborative network of people invested in local journalism.

There’s no better place to experiment on ways to create this network than New Jersey, one of the most underserved states when it comes to local media coverage.

When Free Press surveyed Garden State residents about their local media, many noted that they craved more coverage of their communities. A significant share of the state’s 565 municipalities lacks a locally rooted news outlet. Many of the outlets that do exist ignore residents’ concerns.

Almost all survey respondents remarked on how the location of New Jersey — sandwiched as it is between the huge media markets of Philadelphia and New York City — means that important local issues often fail to get sufficient coverage.

“The past two decades have seen local newspapers bought out and either closed down, absorbed, or just hanging on with little local coverage,” said a survey respondent from Rumson, a New Jersey suburb. These papers are “merely a shadow of the past when each municipality was well covered.”

This isn’t an indictment of the media in New Jersey. Every U.S. newsroom is under pressure to do more with less, and delivering that extra load in a 24-hour news cycle can come at the expense of quality public-service journalism. Another loss: the capacity to cultivate the sources journalists need to cover vital local stories.

Local journalism is at its best when it’s community-driven. The News Voices project is about listening to what New Jersey residents have to say about their information needs — and bringing journalists to the table to hear those voices. By teaming up with reporters, members of the public can advocate for the kind of reliable, credible, and timely information they require.

We aim to create something that doesn’t yet exist: a constituency for the news. And by that I mean a constituency that not only consumes the news but also advocates for its future.


Mike Rispoli is the press freedom campaign director for Free Press. FreePress.net
Distributed via OtherWords.org

(Featured photo via Flickr Jon S/ News Flash)

Report: US Taxpayers Bear ‘Hidden Cost’ of Poverty Wages

Photo via George Kelly/cc/flickr.

Stagnant wages and declining employer-provided benefits mean that low-wage workers in the United States are increasingly reliant on federal and state-run public assistance programs.

In fact, U.S. taxpayers pay roughly $153 billion each year to supplement employers who refuse to pay a livable wage, according to report published Monday by the University of California, Berkeley, Center for Labor.

U.S. taxpayers "bear a significant portion of the hidden costs of low-wage work in America," said report authors Ken Jacobs, Ian Perry, and Jenifer MacGillvary.

According to the report, The High Public Cost of Low Wages (pdf), 73 percent of those enrolled in the country's major public support programs are members of working families. The Berkeley study examined state spending for Medicaid/Children’s Health Insurance Program and Temporary Aid to Needy Families (TANF), and federal spending for those programs as well as food stamps (SNAP) and the Earned Income Tax Credit (EITC).

Despite a rebounding economy, U.S. workers are not being compensated. According to the research, when adjusted for inflation, wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70 percent of the wage distribution. Further, the number of non-elderly Americans who receive insurance benefits from an employer has fallen from 67 percent in 2003 to 58.4 percent in 2013.

"When companies pay too little for workers to provide for their families, workers rely on public assistance programs to meet their basic needs," said report co-author Ken Jacobs, chair of the Labor Center. "This creates significant cost to the states."

According to the Berkeley study, the reliance on public assistance spans a diverse range of occupations, including fast-food workers (52%), childcare workers (46%), home care workers (48%), and even part-time college faculty (25%).

In total, more than half of all state and federal spending on public assistance program now goes to working families, the study finds.

The report comes amid a growing push to increase the federal minimum wage. On Wednesday, workers in hundreds of cities across the country are holding an international day of action to call for a $15 minimum wage and the right to form a union without retaliation.

And the Berkeley researchers contend, raising wages "would lift working families out of poverty and allow all levels of government to better target how our tax dollars are used."

This article was originally published by Common Dreams, and is republished here through a CC license. Photo via George Kelly/cc/flickr.

The Homeless Are Still With Us, and They Still Have A Heartbeat

The Homeless Are Still With Us, and They Still Have A Heartbeat

Among the afflictions and indignities visited upon the homeless, today's surreal news of a Medicaid scheme that preyed on them - perpetrators including 23 New York City doctors and medical workers allegedly made millions by recruiting the poor and homeless from shelters and soup kitchens as "guinea pigs" for bogus medical tests in exchange for a free pair of shoes - is uncommonly vile. Most days, the homeless are just shunned, scorned, ignored and assailed, as a new campaign by the Canadian advocacy group Raising the Roof makes grievously clear.

The campaign, with the hashtag #HumansForHumans, seeks to "change the conversation" about the homeless by presenting them as they are - real people, with real histories and sorrows and pain, living hard lives they did not choose. To foster understanding and hopefully empathy, it includes questions frequently asked of them - "Why can't your family help you?" "How did you become homeless?" "Do you use drugs?" "If you're freezing to death why don't you just get a job DUHHH?" - with their often bleak, pained, patient answers. Another video features homeless people explaining what they want the rest of us to know. But the most searing part is a PSA that - in a nod to the usually light-hearted prank of celebrities reading mean tweets about themselves - shows the homeless reading actual, often pitiless tweets aimed at them. "Maybe if homeless people took care of themselves, looked pretty, we would want to help them," Kubby, homeless for 47 years, dutifully reads. "I don't help yellow teeth." "If home is where the heart is, are homeless people heartless?" asks another. Each brutal reading is followed by a mournful shake of the head, or a soft "wow," or, often, tears. Weep with them, and for them, and then lend a hand or heart.


Will NY Stop Prosecuting Children as Adults?

(Photo via
Michael Coghlan/CC)

New York Still Charges Teenagers as Adults. Will Cuomo's Bill Change That?

by Leticia Miranda ProPublica, March 26, 2015, 10:32 a.m.

In the United States, 16-year-olds can't vote or buy beer. But there is one place where they are treated as adults: New York state's criminal justice system. New York is one of just two states – the other is North Carolina – where 16-year-olds facing criminal charges are automatically put into the adult criminal system.

New York Gov. Andrew Cuomo recently announced a plan to end that policy. He has proposed a bill that would raise the age of adult criminal responsibility to 18 and would prohibit minors from being held in any adult facility. But some critics say the bill is filled with caveats and far less than meets the eye.

Here's a review of what Cuomo is proposing and where critics say it comes up short.

Why does New York automatically prosecute teens aged 16 or older as adults?

Because that's been the law for almost 200 years. In 1824, New York created one of the country's first juvenile detention centers – the House of Refuge – for kids under 16 years old. The issue was briefly revisited in 1961 when New York amended its constitution to reorganize its juvenile courts as family courts that also handle juvenile delinquency cases. But the legislative committee assigned to reorganize the courts couldn't decide whether to raise the age of criminal responsibility. Instead the committee called for a study, which then called for more studies.

Aren't teenagers sometimes charged as adults in other states?

Yes. Nine states automatically charge 17-year-olds as adults. And many other states give prosecutors or judges discretion to decide whether a case should be transferred to adult court for more serious charges like homicide.

What is Cuomo proposing to do?

He wants to gradually raise the age of adult criminal responsibility in New York to 18 through a budget bill. The bill would roll out in two phases. The maximum age of juvenile jurisdiction will be raised to 17 on Jan. 1, 2017 and raised again to 18 by Jan. 1, 2018. The bill would also prohibit the confinement of minors under 21 in adult jails and prisons, prevent minors with first-time misdemeanor offenses or probation violations from being held in detention, and create a separate branch of adult courts for teenagers charged with violent felonies.

The bill is based on a set of recommendations published earlier this year by a governor-appointed commission of experts and advocates.

Many advocates support the bill, including the New York City Bar Association. It is "not perfect but it would be unfortunate if we lost this opportunity to really take a step forward for young people," said Mishi Faruqee, juvenile justice policy strategist with the American Civil Liberties Union. "There is a real urgency to this and I hope New York doesn't squander this opportunity."

What are the criticisms of the bill?

The bill has a variety of provisions that actually create stricter sentencing schemes, particularly for kids charged with violent crimes. Currently, most offenders under 19 have their records sealed. Under Cuomo's bill, a youthful offender's previous violent crimes would be taken into account if the person is charged with another one. The bill would also extend the amount of time a juvenile offender would have to serve before being eligible for probation. Judges would also be prohibited from moving teenagers to the juvenile system if the teen was a principal perpetrator or used a weapon.

Alexandra Cox, an assistant professor of sociology at SUNY New Paltz who has worked in juvenile facilities, wrote that the proposed changes "will actually harm the very individuals it purports to help."

The New York State Defenders Association, which provides legal support to public defenders, has called for the bill to be withdrawn. The group wrote that the bill is "too long, too complicated and too nuanced to be rushed through in the compressed political process that is represented by budget negotiations." The commission whose recommendations the bill is based on did not include defense attorneys.

Cuomo's office, in turn, has defended the bill. "If somebody is unhappy or doesn't think [the bill] goes far enough, we'll point to the wide support the legislation has among children's and civil rights advocates and law enforcement," said Frank Sobrino, spokesman for the governor.

What opposition or criticism does the bill face in Albany?

Plenty, and from both sides of the aisle. At a February legislative budget hearing in Albany, state officials in charge of the juvenile system fielded a slew of questions by mostly Republican lawmakers. Ahead of the hearing, Republican state Sen. Martin Golden criticized the proposal, telling the New York Daily News, "Some of the most heinous crimes are committed by kids who are 16 and 17." A Democratic assemblyman, meanwhile, has said he plans to push competing legislation that would keep more kids out of the adult system.

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Free College Plan Would Help Low-Income Students

Free Community College Would Help Low Income Students Graduation

President Obama recently introduced a proposal to make two years of community college free nationwide. This is a bold effort that might not have been necessary twenty years ago, but today it is sorely needed. There is a popular perception that community college is already free or nearly free, especially for students from low-income households, and that the real challenges facing students have more to do with academic under-preparation or informational barriers.

If only this were true.

The average out of pocket cost facing community college students from low-income families ranges from $8,000-$11,000 per year. That is after all grant aid is taken into account, and it represents the amount that students must borrow and earn in order to make college possible. The situation facing moderate-income families is not much better—and they are often in a more difficult situation since they have little disposable income and yet cannot access the federal Pell Grant.

Thirty years ago, high schools were focused on helping more students envision college as part of their future. Two decades ago they began really focusing on academic preparation for college. But today, ambitious, academically prepared high school graduates are attending college and leaving without degrees because they cannot afford to be there. Among the academically prepared, more than one in five high school graduates from low-income families forgoes college entirely, and about 30 percent who start at a two-year college never complete any degree. These non-completion rates signal talent loss, and things have gotten worse over the last decade.

As an education scholar and researcher who has published extensively on the topic of college affordability, I’m troubled by the response of many progressives and scholars who criticize President Obama’s free community college proposal for not being “narrowly targeted.” The implication is that only a plan that exclusively serves low-income students, and no one else, can meet their needs. This is a false narrative, capable of sowing confusion and killing the prospects of legislation that could do real good.

The truth is that low-income students stand to benefit from free community college in real and measurable ways that will increase their access, boost their persistence, and raise their graduation rates. Since the president’s plan is a “first-dollar” plan, low-income students would receive the greatest subsidies. Students would not have to give up their Pell grants; instead, because tuition would be free, Pell grant funding could be used to meet costs other than tuition. Thus, I predict that low-income and moderate-income students would realize greater gains than their more affluent classmates. The clear and inclusive signal created by “free community college” coupled with the progressive distribution of monetary benefits makes this effective “targeting within universalism.”

Rigorous studies have shown that reducing the cost of community college by even $1,000 a year results in substantial increases across the board. More low-income students enroll directly from high school. More low-income students enroll who would not otherwise have enrolled at all. More low-income students transfer to four-year colleges. And the students who would not have enrolled—except for the fact that community college became more affordable—are more than 20 percent more likely to earn a bachelor’s degree within eight years of high school graduation. All that for a $1,000 discount? Imagine what those numbers would be if the first two years of community college—or any college, as Senator Bernie Sanders recently proposed—were made free.

To help advance a greater understanding of the value and mechanics of making the first two years of college free, I’ve written a response to questions many people have about the president’s proposal. In addition, I’ll be participating in a public discussion with economist Steven Durlauf on the topic that will be held March 12 on the campus of the University of Wisconsin-Madison and televised in the state and online via Wisconsin Eye. Our national dialogue on the merits of making postsecondary education available to everyone—and affordable—is, finally, beginning.


Sara Goldrick-Rab, Ph.D. is the founding director of the Wisconsin HOPE Lab, a research laboratory aimed at improving affordability and equitable outcomes in post-secondary education. She is a professor of educational policy studies and sociology at the University of Wisconsin-Madison, and co-author of Redefining College Affordability: Securing America's Future with a Free Two Year College Option.

For Nonprofit Hospitals Who Sue Patients, New Rules

Nonprofit hospitals get big tax breaks for providing care for patients who can’t afford it. Under new IRS rules these hospitals must take extra steps to inform poor patients they may qualify for financial assistance.

Hospitals that don't take these steps before suing patients could face the ultimate penalty of losing their tax-exempt status. That sounds clear enough. But the first catch is that the IRS does not have a history of aggressive enforcement.

Last month, ProPublica and NPR detailed how one nonprofit hospital in Missouri sued thousands of lower income workers who couldn't pay their bills, then seized their wages, all while enjoying a big break on its taxes.

Since then, the IRS has released long-awaited rules designed to address such aggressive debt collection against the poor. Largely because these new rules fill a void — there were hardly any rules at all — patient advocates agree they are a major step forward.

Even so, they have easily exploitable gaps. It remains up to each hospital, for example, to decide which patients the new rules should apply to. And because the rules only apply to hospitals that have been granted tax-exempt status by the IRS, they don't apply to for-profit hospitals or most public hospitals. ProPublica reported last month that public hospitals can be even more aggressive in collecting debt than nonprofits.

Most hospitals in the U.S. are charitable organizations. They don't pay taxes because they are supposed to be a key part of the safety net for the nation's poor patients. In theory, patients who aren't covered by Medicaid and can't afford insurance — or who are underinsured and can't afford their out-of-pocket costs — can receive necessary care from a nonprofit hospital without facing financial ruin. Each hospital is required to offer services to lower-income patients at a reduced cost and to have a financial assistance policy that states who qualifies for aid, known as "charity care."

But while hospitals are required to have this policy, there have been very few rules on how they publicize it or how they treat patients who qualify. That's where the new rules, which go into effect in 2016, will make the biggest difference. The rules were required as part of the 2010 Affordable Care Act.

At Heartland Regional Medical Center in St. Joseph, the hospital featured in our story, many patients had been sued despite apparently qualifying for financial assistance. In interviews, patients either didn't know the hospital had charity care or wrongly believed they didn't qualify.

Under the new rules, all nonprofit hospitals will be required to post their financial assistance policies on their websites and offer a written, "plain language summary" of them to patients when they're in the hospital. If patients don't apply for assistance or pay their bills, then the hospitals are required to send at least one more summary of the policy, along with mentioning it on billing statements.

And if hospitals plan to sue patients over unpaid bills, they must attempt to verbally tell the patients about their policies, as well as send notices that they are planning to sue and that the patients may qualify for financial assistance.

Hospitals that don't take these steps before suing patients could face the ultimate penalty of losing their tax-exempt status.

That sounds clear enough. But the first catch is that the IRS does not have a history of aggressive enforcement.

"That's always been the problem with the charitable hospital rules," said Corey Davis, an attorney with the National Health Law Program, a nonprofit patient advocacy organization. "The IRS doesn't enforce them and nobody else can enforce them."

The second catch is that hospitals are still responsible for setting their own financial assistance policies, and these protections are only helpful to patients who qualify for help.

"There's all sorts of discretion because [hospitals] just have to have a policy," said Chi Chi Wu of the National Consumer Law Center. The rules don't set a baseline for the type of assistance hospitals must provide, she said.

A hospital could limit aid to uninsured patients with income below the federal poverty line — $11,670 for a single person with no dependents.  A hospital could also restrict aid to uninsured patients, excluding patients with bare-bones insurance policies who might face huge out-of-pocket payments.

For patients excluded by the policy, all these protections would be effectively moot. Even those covered by the policy might receive some reduction on cost, but still find themselves pursued over the outstanding balance.

The hospital industry's reaction to the new rules has been muted. A spokeswoman for the American Hospital Association said it had no comment. But best practices for the industry, set by the Healthcare Financial Management Association, urge hospitals to take steps beyond the new rules to ensure patients eligible for financial assistance aren't the target of lawsuits. For example, as we noted in our story, some hospitals automatically identify some patients as eligible without them having to apply.

Jessica Curtis, an attorney with Community Catalyst, a national nonprofit consumer organization, joined other advocates in stressing that the new rules were welcome. But, as before, she said, there will be large variation among hospitals in how generously they treat lower-income patients. "It will come down to: How seriously does the hospital take this issue?" she said.


This article republished via ProPublica via CC license .ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.


Feature photo via   Flickr.com/ 401(K) 2012


Does This Definition Make Me Look Rich?

Photo via StockMonkeys.com/Flickr

How much income do America’s households take in? How much do they have left after taxes? Do federal taxes leave the nation less or more unequal?

Questions don’t get much more basic than these. Or more complicated. How, for instance, do we define income? Anything anybody collects from a paycheck, of course, should count.

But what about the money an employer shells out to cover an employee’s health insurance premiums? Or safety net benefits like unemployment insurance? Should these dollars count?

Conservatives regularly claim that we need a much more expansive definition of income than we can get from looking at people’s tax returns.

Statistics based on tax returns, they argue, overstate the income share of America’s rich because they don’t take into account the value of the government benefits — like food stamps — that the poor collect.

Conservatives who consider America’s affluent the victims of an oppressive, tax-hungry federal government have already begun scouring a new study from the non-partisan Congressional Budget Office for ammunition. They’ve found some.

In 2011, the new CBO numbers show, America’s top 1 percent took in 14.6 percent of all income and paid 24 percent of all federal taxes. So should we all now feel sorry for America’s most affluent?

Hardly. The new CBO study, taken as a whole, actually reinforces what most Americans already suspect: In modern times, things have never been better for America’s wealthiest. They sit comfortably atop a staggeringly unequal nation.

And that inequality stands out starkly even when researchers define income in a way that tends to deflate the share of the rich and inflate the share of everyone else.

The Congressional Budget Office study counts nearly every possible benefit that low- and middle-income Americans receive from government or their employers as part of their income. The report, its authors acknowledge, “strives to measure income as broadly as possible and thus includes in income some items that people may not usually consider to be part of income.”

Items like employer-paid health insurance premiums. In this new CBO study, these premiums count as income for the working families that receive them. So do their employers’ shares of payroll taxes for Social Security, Medicare, and federal unemployment insurance — as well as the value of benefits lower-income households receive from social safety net programs ranging from food stamps to free school lunches.

Meanwhile, the CBO counts the dollars corporations pay in taxes on their profits as a tax on rich people, since rich people own the bulk of corporate assets. In the CBO breakdown, 75 percent of the taxes corporations pay gets counted as taxes paid by America’s most affluent.

The sum total of all these definitional choices? Lower-income people end up looking richer than they do on their income tax returns, and higher-income people end up looking poorer.

But the CBO report goes on to show that inequality in America, even after all these statistical contortions, just keeps getting worse. How much worse?

Between 1979 and 2011, the study shows, the after-tax income of America’s top 1 percent tripled after inflation — rising 200 percent to an average $1,453,100.

This huge boost for the nation’s top 1 percent ran over four times the income increase that America’s poorest fifth of households realized, and five times greater than gains for middle-income Americans.

However we define income, in other words, the richest Americans are getting much more than their fair share.


OtherWords columnist Sam Pizzigati, an Institute for Policy Studies associate fellow, edits the inequality weekly Too Much. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle ClassOtherWords.org. Photo via Photo via StockMonkeys.com/Flickr.

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