The Inflation Reduction Act Offers the Healthcare Industry an Opportunity to Save Itself
Two weeks ago I argued the CDC’s recently announced Environmental Justice Index (EJI) constitutes financial redlining. Last week I noted the EJI absolutely ignores the climate crisis, the greatest environmental injustice in history. I stated further failing to address the climate crisis is status quo at HHS. This was recently made evident by the fact that both the HHS Secretary, Xavier Becerra, and the CMS Administrator, Chiquita Brooks-Lasure, failed to recognize or appreciate the climate crisis-related tax credit provisions in their August Inflation Reduction Act’s (IRA) press releases. This past Friday, The Lancet did the same in a brief IRA piece written by Susan Jaffe, a DC-based healthcare reporter, despite the confusing title, “Health Organizations Welcome US Climate Crisis Law.”
As widely reported the IRA includes healthcare provisions that include continuing to make ACA healthcare coverage more affordable via enhanced subsidies. However, the IRA also offers the healthcare industry an unprecedented opportunity to at least reduce the industry’s 550 million tons in annual greenhouse gas (GHG) pollution that causes massive population-wide health harms. What the IRA does, in part, is plow new IRS ground by making tax credits refundable for tax-exempt entities and by allowing non-tax-exempt taxpayers to transfer tax credits to unrelated parties for cash. In effect, this means the approximately two-thirds of hospitals that are tax exempt can exploit and financially benefit from these tax preferences over the next decade to reduce their operation’s carbon footprint that includes converting their transportation fleets to EVs.
For example, non-profit hospitals, hospitals regardless of tax status are the largest healthcare emitter of GHG pollution, can monetize certain IRA tax credits. This means they can be paid an amount equal to the tax credit beginning in January 2023. They cannot however transfer in turn the tax credit’s value to another party. This option is available for many of the nearly 40 tax IRA credits including renewable electricity and clean hydrogen production credits, clean fuel and clean electricity production credits and the qualified commercial clean vehicles credit. For example, under the clean electricity production credit a non-profit hospital could receive upwards of 1.8 cents per kWh in credit for a self-funded and owned solar or wind power plant. This credit or subsidy could be significant. Per the Department of Energy, it could defray upwards of a third of the cost of solar power.
Though neither Secretary Becerra nor Administrator Brooks-Lasure recognized potential industry-altering climate crisis-related IRA tax credits, this does not mean the HHS Office of Climate Change and Health Equity (OCCHE) is unaware of the law’s potential. In my conversations with them, they certainly are. They are also aware that they are just that. In order for healthcare or any other industry to begin to or further decarbonize, they have to willingly exploit the IRA’s tax credit provisions.
Considering what is at stake, for example as I’ve frequently noted the healthcare industry’s own GHG pollution is commensurate with upwards of 98,000 US deaths annually, HHS, specifically CMS, should propose regulatory reforms next year that help ensure healthcare providers exploit IRA tax credits by tying them to CMS pay for performance and quality performance benchmarking regulatory reforms. For example, CMS should propose and finalize hospital and physician payment regulations that make success under, for example, hospital value-based purchasing programming and physician success under CMS’ Quality Payment Program, difficult absent gains made in decarbonizing via relevant IRA tax credit provisions.
Preliminary projections show the IRA combined with current policies will, in sum, cut 3.8 billion tons of CO2e (carbon dioxide equivalent) emissions by 2030. This would amount to a 42% reduction, or get the US within 0.5 billion tons of its 2030 climate target of a 50% emissions reduction over a 2005 baseline. Considering the facts that: even if this projection is met it still falls short or what is required to have any chance at avoiding avoid catastrophic warming; and, again, the fact IRA tax credits are successful only to the extent they’re voluntarily exploited, means HHS needs to connect the dots between IRA tax credits and its regulatory authority if it hopes to have any chance in the near future to fulfill its mission to “enhance the health and well-being of all Americans.”