The shadow price of pluralism: the use of tax expenditures to subsidize hospital care in the United States

Abstract

During the 1980s, and particularly during the past year, controversy has arisen over the propriety of the not-for-profit hospital's tax-exempt status. In addressing the issue, policy analysts and activists have focused attention on the comparative efficiency and effectiveness of not-for-profit and for-profit hospitals' provision of social benefit, variously conceived and quantified. We review the results of current research carried out within that focus and suggest that the findings are inconclusive and the focus misplaced. A more profitable avenue of inquiry would be to explore the extent to which the dominance of tax-subsidized not-for-profit hospitals is a societally preferred means of achieving the provision of a level of access to quality care that otherwise would require a large direct government subsidy.