BILL ANALYSIS �
AB 895
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Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 895 (Halderman) - As Introduced: February 17, 2011
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal income tax: physicians: qualified medical
services
SUMMARY : Allows a credit equal to 25% of the value of
"qualified medical services" personally provided by a "qualified
taxpayer" during the taxable year. Specifically, this bill :
1)Defines a "qualified taxpayer" as a physician or surgeon
licensed by the Medical Board of California or the Osteopathic
Medical Board of California.
2)Defines "qualified medical services" as:
a) Medical services provided by a qualified taxpayer at a
"local community clinic" free of charge or at a reduced
rate; or,
b) "Emergency medical services" provided by a qualified
taxpayer free of charge or at a reduced rate at an
emergency department of a general acute care hospital
licensed pursuant to Health and Safety Code (HSC) Section
1250.
3)Defines a "local community clinic" as a community clinic or
free clinic as defined by HSC Section 1204(a).
4)Provides that "emergency medical services" has the same
meaning as "emergency services and care" as defined by HSC
Section 1317.1(a).
5)Caps the credit amount at $5,000 per qualified taxpayer per
year.
6)Specifies that the value of medical services provided shall be
determined according to the usual, reasonable, and customary
rate as described in Section 1300.71 (a)(3)(B) of Title 28 of
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the California Code of Regulations (CCR).
7)States that the "local community clinic" or general acute care
hospital shall provide documentation to the "qualified
taxpayer" regarding the values of the services provided.
8)States that in the case of medical services being provided at
a reduced rate, the amount used to calculate the value of the
qualified medical services provided shall be the difference
between the value of the medical services provided and the
reduced rate charged.
9)Provides that, in cases where the credit allowed exceeds the
taxpayer's tax liability, the excess credit amount may be
carried over to reduce the net tax for the succeeding eight
taxable years, or until the credit has been exhausted,
whichever occurs first.
10)Provides that no other credit or deduction shall be allowed
for the same contribution of medical services.
11)Applies to taxable years beginning on or after January 1,
2012 and before January 1, 2017.
12)Takes effect immediately as a tax levy.
EXISTING LAW allows various tax credits designed to incentivize
socially beneficial behavior or to provide tax relief to those
incurring specified expenses. Currently, there is no credit for
contributing free or reduced price medical services to an
organization or clinic as proposed by this bill.
FISCAL EFFECT : The Franchise Tax Board (FTB) estimates General
Fund revenue losses of $28 million in fiscal year (FY) 2011-12,
$50 million in FY 2012-13, and $50 million in FY 2013-14.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Habitual non-payment and underpayment by Medi-Cal
contributed to the closure of my medical practice in
underserved rural central California. It was impossible to
cover basic operating costs when providing uncompensated
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and undercompensated care to a rural population. As a
result, these residents lost access to a breast cancer
surgeon in their community.
Unfortunately, this is a chronic problem endemic in rural
areas where the physician workforce is scarce.
Reimbursement rates are unsustainable, forcing physicians
to shut their doors.
Right now, doctors seeking to help solve the problem of
lack of access to care in these areas cannot afford to do
so. Assembly Bill 895 is a modest cost-savings measure to
allow doctors to continue serving the people who need them
most.
2)Opponents state that this bill "�w]ould allocate a significant
amount of state tax money towards activities that occur every
day, regardless of tax incentive. To the extent that it is an
attempt to compensate for medical reimbursements, your bill
only shifts valuable tax dollars from the state to these
physicians, rewarding behavior that would occur otherwise. We
are concerned that your bill does not improve the provision of
health care, but results in a substantial loss of revenue to
the state. Given the current budget deficit, the state cannot
afford to provide a tax exemption to physicians at this time."
3)Committee Staff Notes :
a) Physicians at a general acute care hospital : The credit
is available for medical services provided at a local
community clinic and emergency medical services provided at
a general acute care hospital. Ironically, a physician or
surgeon providing services at a private medical practice
would not be eligible for the credit, which seems to be at
odds with the author's statement. The author states that,
"�h]abitual non-payment and underpayment by Medi-Cal
contributed to the closure of my medical practice?." Under
this bill, if Assemblymember Halderman's medical practice
was not a local community clinic, the credit would not have
been available to her. The author may wish to amend this
language if the intent is to include a physician or surgeon
with a private medical practice.
b) Salaried physicians : It is not entirely clear what
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would occur in the situation of a salaried physician
providing emergency services free of charge or at a reduced
rate. Because this bill is restricted to individual
physicians, and is not available to hospitals, what would
occur in a situation when a salaried physician provided
services to an uninsured individual? As this bill is
written, a doctor would still receive their salary, and so
arguable, the services were not provided free of charge or
at a reduced rate by the physician. Instead, the hospital,
which is not a "qualified taxpayer," provided the services
free of charge or at a reduced rate and would remain
uncompensated. The author may wish to amend this bill if
the intent is to compensate all emergency services provided
free of charge or at a reduced rate at an emergency
department of a general acute care hospital.
c) Emergency medical services : HSC Section 1317.1 defines
"emergency services and care" as "medical screening,
examination, and evaluation by a physician, or, to the
extent permitted by applicable law, by other appropriate
personnel under the supervision of a physician, to
determine if an emergency medical condition or active labor
exists and, if it does, the care, treatment, and surgery by
a physician necessary to relieve or eliminate the emergency
medical condition, within the capability of the facility."
The question arises, if an individual is treated at an
emergency facility and it is determined that the condition
is not a medical emergency, will the treating physician be
eligible for a credit? The author may wish to amend this
bill to clarify if the intent is to include all medical
services provided in an emergency room, or only those
services provided to an individual whose condition is
deemed to be a medical emergency.
d) Standard of valuation : CCR Section 1300.71 determines
the value of medical services provided by taking into
consideration "the reasonable and customary value for the
healthcare services rendered based upon statistically
credible information that is updated at least annually and
takes into consideration (i) the provider's training,
qualifications, and length of time in practice; (ii) the
nature of the services provided; (iii) the fees usually
charged by the provider; (iv) prevailing provider rates
charged in the general geographic area in which the
services were rendered; (v) other aspects of the economics
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of the medical provider's practice that are relevant; and
(vi) any unusual circumstances in the case." The use of
this standard may lead to a great difference in the
valuation of the same medical care provided at different
locations and/or by different physicians. Using the CCR
Section 1300.71 standard to determine the value of medical
services provided may be an unfair standard due to the
potential of variation in medical billing. To avoid the
difficulty of assessing the value of procedures and
services and to ensure a fair and uniform billing standard,
this bill should adopt a clear standard of valuation.
1)Related legislation :
AB 2148 (Tran), introduced in the 2009-10 legislative session,
would have provided a personal income tax deduction, not to
exceed $1,500 per taxable year, to physicians that provide
free medical services in clinic or hospital settings. AB 2148
was held in the Assembly Appropriations Committee.
SB 92 (Aanestad), introduced in the 2009-10 legislative
session, would have, among other things, allowed a credit
equal to 25% of the tax of a qualified medical individual
providing medical services in a rural area, as defined. SB 92
failed to pass in the Senate Health Committee.
AB 1592 (Huff), introduced in the 2007-08 legislative session,
would have allowed a credit equal to 50% of the fair market
value of uncompensated medical care provided by a physician
for an eligible individual. AB 1592 was never heard in
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
California Tax Reform Association
Analysis Prepared by : Myriam Bouaziz and M. David Ruff / REV. &
TAX. / (916) 319-2098
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