Obama's Budget Would Hurt Healthcare Charitable Giving, Says Group

Budget proposals from the White House to reduce tax deductions for charitable donations and freeze discretionary spending will harm fundraising for nonprofit hospitals, said the Association for Healthcare Philanthropy (AHP).

The move, which includes capping charitable donations for those making more than $250,000 to 28%, will stop wealthy donors from giving to nonprofits and dry up funds to help the poor and underinsured, according to the group.

"Despite signs that the economy is starting to recover, nonprofits hospitals are struggling to keep up with the burgeoning numbers of under- and uninsured Americans that are seeking medical care in their local community emergency rooms," said William C. McGinly, president/CEO of AHP in a media release. "A limit on charitable deductions aimed at those who are in a financial position to make the most significant contributions sends the wrong message at the wrong time."

"This is a significant challenge," McGinly said.

"Hospitals have cut back on spending, mainly at the expense of necessary capital improvements. A three-year discretionary spending freeze is likely to cut back the ability of state and local governments to provide health-related grants and Medicaid funding, making it imperative for individuals, businesses and foundations to step up their philanthropic support."

A December survey of AHP members found them attempting to cope with strained economic conditions by boosting fundraising efforts and controlling costs. Three out of four reported increased contact with donors and many put more emphasis on major gifts.

Almost half applied for more grants and put more energy into annual giving and planned giving programs, while at the same time more than half reduced their fundraising budgets and about one quarter decreased staff, AHP said.

Despite these extra efforts, 85% of survey respondents said their philanthropy programs were negatively affected by the economy last year, forcing almost half to downgrade giving projections for the year. Annual direct mail campaigns and special event fundraisers were hard hit.

Overall, far fewer major gifts were secured, and 40% of respondents reported declines in revenue from government and private grants, and 80% cited declines in investment income, with 43% seeing a significant decrease.

Some 27% of development organizations used more of the money they raised in 2009 to meet increased demands for hospital charity care, the report found, underscoring the increased need for philanthropic support to cover costs that nonprofit hospitals are no longer able to fund from decreasing margins. A November 2009 American Hospital Association study found that 34% of U.S. hospitals expected financial losses in the first half of 2009—up from 29% for the same period in 2008—placing a growing need for philanthropic funding to fill the gap.