Tax Exempt Hospitals Should Not Promote Birth Tourism

Texas Governor Greg Abbott has ordered an investigation into a tax exempt hospital that advertised childbirth services near the U.S.-Mexico border just days after the U.S. Supreme Court struck down President Trump's executive order ending birthright citizenship. With the Court reaffirming that children born on U.S. soil generally acquire U.S. citizenship under the 14th Amendment, Mission Regional Medical Center's campaign encouraging expectant mothers from Mexico to give birth in Texas drew national attention and renewed scrutiny of how taxpayer-subsidized tax exempt hospitals use their public benefits.

Mission Regional Medical Center promoted Spanish-language billboards advertising "Birth Packages in South Texas" beginning at $3,950 and directed prospective patients to a website encouraging them to have their babies in Texas. After widespread criticism, the hospital removed both the billboards and the website. Hospital officials said the campaign, which began in 2021, was discontinued because of the potential for "unintended misunderstanding" and stated that the hospital complies with all federal and state laws.

Mission Regional also participates in the federal 340B Drug Pricing Program. Combined with its tax exempt status, the hospital receives substantial taxpayer support intended to advance charitable care. Instead, the controversy has raised new questions about whether those public benefits are being used consistent with that mission.

Hospital services have become the fastest-rising major consumer expense in the United States. Since 2000, hospital service prices have increased 281.4 percent, more than any other major category tracked by the Bureau of Labor Statistics and more than three times the rate of overall inflation. While many factors contribute to rising healthcare costs, generous tax preferences and government subsidies have reduced the pressure on many large tax exempt hospital systems to control costs and demonstrate public value.

Tax Exemption Should Require Accountability

Tax exempt hospitals receive billions of dollars in federal, state, and local tax benefits each year in exchange for providing charitable care and community benefits.

Many now operate like large healthcare corporations. They acquire physician practices, expand into new markets, accumulate substantial financial reserves, and charge prices that continue to outpace overall inflation.

Tax exemption is not the only reason hospital costs have risen, but it has helped create an environment with limited accountability despite significant taxpayer support. Patients and taxpayers deserve to know whether those public benefits are advancing charitable missions or simply strengthening large hospital enterprises.

Congress Is Moving Toward Greater Transparency

The Mission Regional controversy comes as Congress is considering stronger oversight of tax exempt hospitals. Earlier this month, the U.S. House Ways and Means Committee approved H.R. 9504, the "Tax Exempt Hospital Transparency Act," which would strengthen reporting requirements for tax exempt hospitals and provide taxpayers and policymakers with better information about how hospitals use the billions of dollars in tax benefits they receive.

The legislation reflects growing concern that tax exempt hospitals should demonstrate greater accountability for the public benefits they receive. Greater transparency would make it easier to determine whether hospitals are fulfilling their charitable missions or operating primarily as large healthcare enterprises.

The Center for a Free Economy has long supported these reforms. In "Taxpayers Should Not Subsidize Hospital Empires," CFE argued that taxpayers should not finance the continued expansion of tax exempt hospital systems that increasingly resemble their for-profit competitors. More recently, CFE led a coalition of conservative organizations urging Congress to advance H.R. 9504, the "Tax Exempt Hospital Transparency Act," in "Conservative Coalition Calls for Greater Tax Exempt Hospital Transparency." The coalition called for clearer public reporting and stronger accountability for hospitals receiving taxpayer subsidies.

Public Benefits Should Produce Public Value

The Mission Regional advertising campaign may be an isolated incident, but it highlights a broader problem. Institutions receiving billions of dollars in taxpayer support should be held to a higher standard of accountability.

Tax exempt status is a public benefit, not an entitlement. Hospitals that receive valuable tax preferences and additional subsidies through programs such as 340B should be able to demonstrate that those resources are supporting charitable care rather than institutional expansion.

CFE Takeaway

Taxpayers should not subsidize hospitals that promote birth tourism or other activities unrelated to their charitable mission. As Congress considers H.R. 9504, the "Tax Exempt Hospital Transparency Act," policymakers have an opportunity to strengthen transparency and accountability so tax exempt hospitals better demonstrate that their public subsidies are advancing charitable care and community benefit.