TANF-ACF-PI-2011-10 (Charity Care Expenditures)
State and Territory agencies (hereafter, States) administering the Temporary Assistance for Needy Families (TANF) Program.
Charity Care Expenditures
45 CFR 260.30, 45 CFR 263.2(a), 45 CFR 263.2(e)
To clarify to States that costs for charity care incurred by hospitals are not allowable TANF maintenance-of-effort (MOE) expenditures.
45 CFR 263.2(a) outlines the types of expenditures that may count toward meeting a State’s basic MOE requirement. For example, States may use MOE funds to cover actual medical expenses under a separate State program or for a TANF program funded with segregated State funds, as long the benefit funded is consistent with goals of TANF. 45 CFR 263.3(e) further specifies that MOE expenditures for benefits or services listed under 45 CFR 263.2(a) may include “allowable costs borne by others in the State (e.g., local government), including … the value of third party in-kind contributions.” POLICY: Charity care (defined as the uncompensated cost to a hospital for providing, funding, or otherwise financially supporting health care services to financially or medically indigent patients when the hospital normally charges patients for these services) is not an allowable TANF MOE expenditure because it constitutes foregone revenue. TANF regulations at 45 CFR 260.30 define expenditure as “any amount of Federal TANF or State MOE funds that a State expends, spends, pays out, or disburses…. It does not include any amounts that merely represent avoided costs or foregone revenue.” Hospitals that provide charity care normally charge patients for their services, but make an exception for charity care cases and do not impose a charge on these patients, thus foregoing revenue they would have otherwise earned. The cost of these services therefore cannot be claimed as TANF MOE.
If we discover that a State has reported charity care expenditures either in past or future financial reports, we will inform the State that it should revise its reporting to remove the unallowable expenditures. Failure to remove the unallowable expenditures from a financial report may result in a reporting penalty. If the removal of the amount lowers the State’s MOE expenditures below its required spending level, the State may also be subject to an MOE penalty. Likewise, it is important for a State that submits or has submitted a claim for the Contingency Fund to ensure that it satisfies or has satisfied the 100-percent MOE requirement without including charity care expenditures. INQUIRIES: Please direct inquiries to the TANF Program Manager in your Region.
Earl S. Johnson
Office of Family Assistance
Last Reviewed: October 29, 2015