Contributor: The Deadly Gap in the Charity Care System

Many of us are one major life event away from losing health insurance. As Medicaid funding gets cut and Medicaid eligibility tightens, millions of Americans are at risk of crushing medical debt.^1,2 Some of the few safety nets available to uninsured Americans are free clinics, like the one I run in Cherry Hill, New Jersey, and charity care.

I always thought of charity care as a band-aid solution, but I didn’t think that the way the charity care system is structured could be causing actual harm. I knew uninsured patients were often invisible to health systems and to policy makers, but I didn’t realize how deadly their absence in the data could be.³

Making the problem visible is the first step to solving it. And that’s exactly where we clinicians who specialize in caring for uninsured populations can help.

Mike’s Story

In November, I got a call from a colleague at a nearby health system. She told me about a patient, “Mike,” 63 years old and uninsured, who arrived at her health system’s emergency department presenting with urinary retention. The cost of his visit was covered by charity care, and he was discharged with a catheter and instructions to follow up with a urologist.

But when Mike reached out to the urology office at the same health system, he was told that the office didn’t accept charity care and that the cost of the visit would be $200—$200 Mike didn’t have.

By the time Mike went back to the hospital, his catheter was severely infected. He ended up in the intensive care unit on a ventilator, battling for his life. Nine days and approximately $250,000 of care later, Mike succumbed to complications from catheter-associated urinary tract infection.

I’ve seen thousands of uninsured patients at the Cherry Hill Free Clinic since founding it in 2017, but I couldn’t stop thinking about this case. Why does this deadly gap in the system exist? Why isn’t it more well known? If the purpose of charity care funding is to ensure that hospitals can treat un- and underinsured patients without going bankrupt, why spend thousands on catastrophic care that doesn’t even save the patient when $200 could have kept him alive and healthy?

Follow the Money

Charity care is a safety net for both low-income patients and for the hospitals that treat them. Unpaid medical debt, classified as “bad debt,” can become a major liability for hospitals and health systems. Charity care helps hospitals protect their creditworthiness, supports their nonprofit status, and can be an important funding source.⁴

Charity care is funded through the Medicaid Disproportionate Share Hospital (DSH) payment and through state-based uncompensated care pools. It’s critical to know that funding doesn’t take into account patient outcomes or the number of people kept healthy. Both DSH payments and uncompensated care pools give out charity care dollars to health systems as lump sum reimbursements for their past incurred costs of treating uninsured and Medicaid patients.⁵ That means that spending $250,000 on a patient who dies from preventable causes means more funding next year than spending $200 each for a thousand uninsured patients to get basic outpatient care.

As I dug into this case, I examined the potential proximate causes. Was it a case of the physician fee loophole?⁶ Misalignment between state regulations and clinical realities? A simple failure to stabilize and safely discharge a patient without ensuring he had financially accessible follow-up care?⁷ However, I realized that the exact reason matters less than the reality that health systems in New Jersey have no structural and financial incentives to make sure a $200 outpatient visit is covered, even if it would save a patient’s life.

To be clear, I don’t think that hospital administrators are consciously making choices to harm uninsured patients. Perverse incentive structures can and do cause enormous harm without any conscious intent, and this is hardly limited to charity care. Fee-for-service payment still dominates private insurance markets, even though we’ve known for decades that it rewards volume over value.⁸

But while states aggressively regulate medical billing and insurance to protect patients with private insurance from getting priced out of preventive care,⁹ that oversight is largely lacking from charity care.¹⁰

Solutions, but No Data

However, there are bright spots. I was excited to find that there are several states developing and testing value-based reforms to charity care that tackle these perverse incentives at their root.

In California, policy makers realized that it was “really hard for [healthcare systems] to invest in non-hospital outpatient primary care, because it meant they would lose DSH funding.”⁵ In response, they shifted the incentives, creating a “Global Payment Pool” that pays health systems for providing more primary and preventive care to uninsured patients.⁵

In Massachusetts, hospitals must participate in a Medicaid accountable care organization to get DSH funds.⁵ In New York and Washington, Delivery System Reform Incentive Payment demonstrations tie safety-net funding for uninsured patients to performance requirements.¹¹

The frustrating thing, though, is that no one really knows whether outcomes for uninsured patients in California, Massachusetts, New York, and Washington are improving.

These states have seen overall reductions in preventable hospital encounters and ED visits and improved outcomes for patients with chronic diseases,^11-13 but those wins are most easily demonstrated through Medicaid claims. Uninsured patients don’t have claims to track, making them almost impossible to follow over time. Researchers can’t actually show that improving the delivery system for uninsured patients improves their outcomes, because they don’t have the data.^3,11

It’s an invisible problem, not showing up on anyone’s dashboard or reports, just in anecdotal stories like Mike’s being shared clinician-to-clinician. This is where I believe free clinics hold the missing key.

Free Health Clinics as Incubators for Systemic Solutions

My colleague called me with Mike’s story because I specialize in helping low-income patients navigate fragmented health care systems. She wanted to know if I knew of local resources that could prevent this from happening again. If Mike had come to our free clinic, we would have removed the catheter ourselves, supported him with medications to alleviate the underlying condition causing urinary retention, and connected him with a urologist.

But also: his clinical and financial data would have been in our system, easy for the researchers and policy makers working on solving this problem to track.

There are millions of Mikes in this country, and millions more who are one job loss or divorce away from being in his shoes. New Jersey has seen a 14% enrollment drop in marketplace insurance, and we still haven’t hit the real cliff.¹⁴ Uninsured patients need medical homes that are incentivized to provide them with high-quality preventive and specialist care, not to wait until minor problems snowball into life-threatening emergencies.

Even though local resources like free clinics and coordinated specialist networks aren’t enough to solve a systemic problem like the charity care gap on our own, we’re the ones seeing the results of these systemic problems and ringing the alarm bells. We have the knowledge, access, and data that policy makers need.¹⁵ If we’re treated like partners and invested in the way Medicaid programs have been, we can be the incubators for systemic solutions.

Each of the statewide, value-based reform projects described above started as a local program or pilot. Each of those local programs or pilots acted as a catalyst that provided policymakers with hope, motivation, momentum, and most importantly: evidence.^5,11

Value-based care and universal health coverage may be the ultimate fixes to the deadly charity care gap, but to get there, clinicians, policy makers, and the public need to be able to see what we all lose from our current system and what’s possible when care moves upstream.

Jubril Oyeyemi, MD, FHELA, serves as the chief medical officer of Camden Coalition of Health Care Providers, the medical director of the Community Health Institute at Virtua Health, and the founder and CEO of the Cherry Hill Free Clinic, one of New Jersey’s largest free centers of care.

References

1. Williams E, Mudumala A, Hinton E, Rudowitz R. Medicaid Enrollment & Spending Growth: FY 2025 & 2026. KFF. November 13, 2025.
2. State Medicaid Budgets to Decline by Hundreds of Billions over the Next Decade; Impacts Vary Widely Across States. RAND. February 26, 2026.
3. The primary care safety net. National Health Policy Forum. September 28, 2010.
4. Beck A, Gilstrap C, Rippy J, Vansant B. Strategic reporting by nonprofit hospitals: an examination of bad debt and charity care. Rev Account Stud. 2021.
5. Lipson D, Heeringa J, Vogt R. Advancing Value-Based Payment in Medicaid Section 1115 Delivery System Reform Demonstrations: The Role of Hospital Supplemental Payments. Mathematica. August 2020.
6. Andrews M. Big loopholes in hospital charity care programs mean patients still get stuck with the tab. KFF Health News. September 25, 2025.
7. Bitterman RA. EMTALA: A Practical Primer for Risk Professionals. American Society for Health Care Risk Management (ASHRM).
8. Annual Report on the Performance of the Massachusetts Health Care System. Center for Health Information and Analysis; March 2026.
9. Monahan CH. Outpatient Facility Fees [Presentation]. Center on Health Insurance Reforms, McCourt School of Public Policy, Georgetown University; 2023.
10. Levinson Z, Hulver S, Neuman T. Hospital charity care: How it works and why it matters. KFF. November 3, 2022.
11. Heider F, Kartika T, Rosenthal J. Exploration of the Evolving Federal and State Promise of Delivery System Reform Incentive Payment (DSRIP) and Similar Programs. MACPAC. March 2018.
12. Felland L, Lipson D, Heeringa J. Examining New York’s Delivery System Reform Incentive Payment Demonstration: Achievements at the Demonstration’s Midpoint and Lessons for Other States. Centers for Medicare & Medicaid Services. April 2018.
13. Delivery System Reform Incentive Payment (DSRIP) Program Close-Out Report. Executive Office of Health and Human Services of the Commonwealth of Massachusetts. 2023.
14. Han D. New Jersey's Obamacare marketplace sees enrollment dip. POLITICO Pro. April 21, 2026.
15. Increasing Specialty Care Availability. FSG.