Charity Care Application

What charity care is — and why it exists

The majority of hospitals in the United States operate as nonprofit entities exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. This tax exemption is not unconditional. In exchange for it, the IRS requires nonprofit hospitals to provide a community benefit — and one of the most significant required components of that community benefit is financial assistance for patients who cannot afford to pay for care.

The specific rules governing hospital financial assistance programs are codified in Section 501(r) of the Internal Revenue Code, which was added by the Affordable Care Act. Under 501(r), nonprofit hospitals are required to have a written financial assistance policy, to apply it consistently to all applicants, to publicize the policy in languages spoken by significant portions of the community, to limit what they can charge financially eligible patients to no more than the amounts generally billed to patients with insurance, and to make reasonable efforts to determine whether a patient qualifies for financial assistance before engaging in extraordinary collection actions.

This is not a voluntary charitable program. It is a legal obligation that nonprofit hospitals must fulfill to maintain their tax-exempt status. The amounts involved are substantial — charity care write-offs at large health systems are measured in hundreds of millions of dollars annually.

Who qualifies for charity care

Eligibility for charity care is determined by each hospital's individual financial assistance policy, which must be publicly available. Policies vary significantly across hospitals and health systems, but most share a common structure: eligibility is based on household income relative to the Federal Poverty Level (FPL), and the percentage of the bill covered scales with income.

Common eligibility structures include full assistance (100% of the bill) for households earning up to 200% of the FPL, partial assistance on a sliding scale for households earning between 200% and 400% of the FPL, and some programs that extend eligibility to households earning up to 600% of the FPL. The 2024 Federal Poverty Level for a family of four is approximately $31,000 — 400% of that is approximately $124,000. This means a family of four earning $124,000 per year may qualify for significant financial assistance at many nonprofit hospitals.

Insurance status generally does not affect charity care eligibility. Patients with insurance who are still left with significant balances after insurance processing — a common situation with high-deductible health plans — may qualify for charity care on the remaining balance. Patients without any insurance may qualify for the largest assistance levels, with many hospitals covering the full bill for uninsured patients below income thresholds.

Not sure where to start? Get a free consultation — our case managers will review your situation at no cost.

Why most eligible patients never receive charity care

If charity care is a legal requirement and millions of Americans qualify, why don't more people receive it? The answer lies in the application process — a process that hospitals have no structural incentive to make easy.

Charity care applications require financial documentation — typically including recent tax returns, recent pay stubs, recent bank statements, and sometimes documentation of other income sources, assets, and household size. The documentation requirements vary by hospital, and what is acceptable at one facility may not be acceptable at another. The form itself must be submitted to the correct department — often described as patient financial services or financial counseling — within a specific timeframe after the care was received, which varies from 90 days to 240 days depending on the hospital's policy.

Applications that are incomplete — even by a single document — are routinely denied without substantive review. Applications submitted after the hospital's internal deadline are routinely denied regardless of eligibility. Applications that are correctly completed but submitted to the wrong department may be lost or processed slowly enough that the account enters collections before a determination is made.

Hospitals are not required to notify patients of their charity care eligibility proactively. The requirement is to have the policy and to make reasonable efforts to determine eligibility before extraordinary collection actions — not to actively seek out eligible patients and help them apply. The burden is on the patient, which means the burden falls primarily on people in financial distress who are also navigating a medical situation.

The MedErase charity care process

Our case managers screen every client for 501(r) charity care eligibility as a standard component of the Discovery Phase. This screening involves reviewing the specific financial assistance policy of every hospital involved in your bill, assessing your household income against the applicable thresholds, and identifying the specific tier of assistance for which you are likely eligible.

When eligibility is confirmed, we prepare and submit the complete charity care application on your behalf. This includes assembling all required financial documentation, completing the hospital's application form according to its specific requirements, and submitting the application to the correct department through the correct channel within the hospital's deadline. We track the application through the hospital's review process and follow up at regular intervals to ensure it is being processed.

When a charity care application is denied — even when we believe the patient clearly qualifies — we file a formal appeal of the denial. Charity care denials are appealable at most hospitals, and a well-documented appeal that directly addresses the basis for denial succeeds at a meaningful rate.

MedErase handles this for you. Get a free consultation and our case managers will assess your specific bill.

Charity care at for-profit hospitals

For-profit hospitals are not subject to the 501(r) requirements and are not legally required to offer charity care. However, many for-profit hospital systems have voluntary financial assistance programs — either as a matter of corporate policy, as a competitive response to nonprofit hospitals in their markets, or as a condition of government contracts or state licensing requirements.

Our case managers assess whether voluntary financial assistance is available at for-profit facilities and, when it is, pursue it through the same documented application process used at nonprofit institutions. When no financial assistance program exists, the full focus shifts to direct negotiation using benchmark data and billing error documentation.

Charity care and your credit

Under federal rules effective July 2022, medical debt under $500 no longer appears on consumer credit reports from the major credit bureaus. Medical debt that has been paid — or that is the subject of an active dispute or financial assistance application — should not be reported to credit bureaus during the resolution process. However, this protection is not always correctly applied in practice.

Our case managers verify that active financial assistance applications are flagged appropriately with the hospital's billing department to prevent collection activity and credit reporting while the application is under review. When accounts have been improperly reported to credit bureaus while a charity care application or dispute was active, we address the credit reporting separately as part of the resolution.

Frequently asked questions about charity care applications

Can I apply for charity care if I have insurance?

Yes. Insurance status does not disqualify you from charity care. Most programs apply to the balance remaining after insurance has processed the claim — so if you have a high deductible and are left with a significant balance, you may qualify for charity care on that remaining amount.

Can I apply for charity care after my account has gone to collections?

In many cases, yes — though it is more complex. Under 501(r), hospitals are required to make reasonable efforts to determine charity care eligibility before engaging in extraordinary collection actions. If a hospital sent your account to collections without first applying its charity care policy, that is a potential 501(r) violation. Our case managers assess the specific circumstances and determine the best path forward.

What if the hospital says I make too much to qualify?

Income thresholds vary significantly by hospital. A hospital that denies your application at their threshold may still have a partial assistance tier you qualify for. Additionally, some hospitals use gross income while others use adjusted gross income — a distinction that can meaningfully affect eligibility. Our case managers review the denial and assess whether an appeal based on a different income calculation or documentation approach would succeed.

Does applying for charity care affect my credit score?

Applying for charity care does not affect your credit score. The application process is between you and the hospital's billing department — it does not involve a credit inquiry or any credit reporting. What can affect your credit is an unpaid bill that goes to collections, which is precisely what charity care is designed to prevent.