The Reagan administration is considering a new regulation that civil rights groups say would jeopardize half a billion dollars in free medical care that hospitals are now required to give the poor.
The regulation, under study in the Department of Health and Human Services, applies to hospitals and other institutions built in part with federal funds under the 1946 Hill-Burton Act, which required them to provide free care for the poor.
Under current rules, this care each year must be equal 10 percent of the hospital's original construction grant or 3 percent of its operating costs.
If a hospital fails to provide this much in any year, the unmet portion carries over to future years. And, under a series of regulations, the last and strongest issued in 1979, hospitals are required to notify patients that such care is available.
About 5,000 institutions are subject to these rules, including more than half the nation's hospitals.
The proposed new regulation, a copy of which was obtained by The Washington Post, would weaken the requirement that hospitals carry over unmet obligations, and the requirement that they post notices.
The proposal was drafted by Assistant HHS Secretary Edward N. Brandt Jr.
Bonnie Milstein, head of the health task force of the Leadership Conference on Civil Rights, said it "creates a Catch-22 situation in which hospitals are the winners and poor people and minorities are the losers."
But Brandt, in a memorandum prepared for Secretary Richard S. Schweiker, who has made no decision on the matter, said the amendments would give hospitals more discretion while requiring less paperwork and "preserving the interests of the intended beneficiaries of uncompensated services."
Pam Bailey, assistant HHS secretary for public affairs, said Schweiker has not yet seen the memorandum. "It is currently being circulated among senior staff for comment. The final recommendation could well differ from the original draft and could also include a recommendation that no changes be made," she said.
From 1946 to 1981, according to the General Accounting Office, about $5.9 billion in federal aid was provided to hospitals and other such institutions under Hill-Burton and related legislation.
The associated free-care rule was fairly loosely enforced for years, but in 1979 the Carter administration, under instructions from Congress, toughened the enforcement rules.
Those eligible for the free care include all below the HHS poverty line (now $9,300 for a family of four) and in some cases, those with incomes up to twice that level.
Notices of the availability of free services must be posted in English and Spanish in at least three locations (business office, emergency room, admissions office). And individual written notices must also be given to all patients, under the rules.
The current level of free services required is more than $450 million a year. According to figures provided by the American Hospital Association, the requirement presently applies to about 3,600 hospitals and 1,400 clinics, nursing facilities and other institutions.
"The new regulations say that they are still required to provide the same level of free care, but the change is the hospitals aren't required to tell anybody," Milstein said.
"Now they will only be required to publish a legal notice in the newspaper and develop some other, unchecked 'plan' of notification, not cleared in advance by the department, that could be totally ineffective."
When the 1979 regulations were put into effect, the American Hospital Association sued in federal court to block them, contending the regulations were too demanding, but lost. The AHA has appealed.
An AHA spokesman said yesterday that a major AHA objection is that providing free services worth 10 percent of the initial federal grant each year for the required 20 years means that a hospital must ultimately provide services adding up to twice its grant.
Last year the AHA proposed revision of the free-services requirement to the Task Force on Regulatory Reform headed by Vice President Bush, and in a letter to Brandt, suggested, among other things, changes in both the notice requirements and in the deficit-makeup requirements, as well as another change Brandt is proposing: giving the hospital five days instead of two to decide whether an applicant is eligible for free services.
Brandt, in his memo to Schweiker, predicted that the AHA and the American Association of Homes for the Aging "will respond affirmatively to the proposed changes but will claim that more drastic revisions are needed," but that consumer and civil rights groups would object. But he said the provisions to which the latter would object were "narrowly drawn" and would not allow institutions to escape obligations and chuck making up deficits.