July 12, 2012

It’s Time for Nonprofits to Take the Stage in Health Care Reform

Nonprofits may seem like bit players when it comes to implementing the Affordable Care Act. To realize the Act’s twin goals of universal coverage and cost control, however, nonprofits will need play an important part alongside the other actors in the health care system. This role will present nonprofits with an unprecedented opportunity—and a huge challenge.

By: Daniel Stid

Two weeks ago the Supreme Court upheld most of the provisions of the Affordable Care Act (ACA). Doctors, nurses, hospital administrators, private insurers, and government officials are once again the lead actors now that the justices have left the stage, and they will continue to play their respective roles in implementing the new system. However, whether the play comes off may ultimately depend on what at first glance might appear to be a band of bit players in the wings—the nation's human service and behavioral health nonprofits. Implementation of the ACA presents these organizations with an unprecedented opportunity—and a huge challenge.

Some background will be helpful to support this claim. Recall that, for all of its complexity, the ACA seeks to improve the health of the American people by advancing two basic goals. The primary objective is to approximate universal health care coverage for every American. The secondary and supporting objective is to introduce new elements into the health care system in order to begin to control its spiraling costs.

In the long run, universality has to rest on affordability. One part of the law the Supreme Court struck down has in fact made this a near-term imperative. States no longer have to expand Medicaid to cover everyone up to 133 percent of the federal poverty line—the primary mechanism through which the ACA sought to extend coverage to Americans unable to afford it. To be sure, states still have powerful incentives to do so, as the federal government will cover 100 percent of the cost of this expansion through 2016 and 90 percent of the cost thereafter, but these carrots are no longer accompanied by any sticks.

Thus far, governors in Texas, Florida, Wisconsin, Louisiana, Mississippi, and South Carolina have said their states will not expand Medicaid. As Sarah Kliff noted in Wonkblog, "a full quarter of the 15.8 million Americans expected to gain Medicaid under the Affordable Care Act live in these states. These six governors, if they follow through on their pledges, can single-handedly shrink the Medicaid expansion by 3.89 million people."

It would be easy to dismiss these pledges as a rear-guard action by GOP partisans. But their opposition to taking on even a heavily subsidized augmentation in their Medicaid rolls is not without merit. The Kaiser Family Foundation has documented that Medicaid has been the fastest growing of all health care spending categories, public or private, increasing on average by 7.2 percent annually over the past three decades. From 1970 to 2010, Medicaid's share of total health care spending in the U.S. more than doubled, from 7.1 percent to 15.2 percent. Medicaid has become the largest single component in state budgets and is rapidly crowding out other priorities. The National Association of State Budget Officers notes that Medicaid has grown from 21.9 percent of total state expenditures in 2009 to 23.6 percent in 2011. By comparison, K-12 education, the second largest component, fell from 21.5 percent to 20.1 percent over that same period. In light of these trends, state leaders have reason to balk at taking on more exposure to Medicaid's mounting costs—especially knowing that the federal government, which will be increasingly cash strapped itself, could shift more of the funding burden back over to the states down the road.

For these objections to be overcome, the costs of supporting Medicaid beneficiaries needs to come down—in particular for the most intensive users of the system. Analysis by the federal government's Centers for Medicaid & Medicare Services has shown that 54 percent of Medicaid costs are concentrated in just 5 percent of the beneficiaries. These high-cost patients are likely to be battling mental illness and/or substance abuse alongside their physical ailments. Researchers at the Center for Health Care Strategies have found for example that roughly 70 percent of Medicaid beneficiaries dealing with chronic and expensive health conditions such as hypertension, diabetes, coronary heart disease, congestive heart failure, and asthma are also mentally ill and/or addicted. "The addition of mental illness for those with common chronic physical conditions is associated with health care costs that are 60 to 75 percent higher than those without a mental illness. The addition of co-occurring mental illness and a drug and alcohol disorder for beneficiaries with common chronic physical conditions results in two- to three-fold higher health care costs."

As Susan Dreyfus, former Secretary for Social and Health Services in Washington state and now CEO of the Alliance for Children and Families recently shared with me, "you can't buy smarter and assume you will affect the cost curve with these dynamics of high cost populations. It will be comprehensive assessment and integrated case management that includes recognition of the social determinants of a person's health that will drive better outcomes at lower costs."

Here is where the nation's human service and behavioral health nonprofits come in. Many Alliance members and other community-based organizations have been holding up our society's safety net for more than a century, supporting impoverished Americans struggling with mental illness and substance abuse and complicating factors like the lack of stable housing and domestic violence. The Urban Institute reports that there are roughly 150,000 nonprofits providing human services and health care outside of hospital and primary care settings. Notwithstanding the notoriously fragmented nature of the safety net, we can reasonably assume that these nonprofits are, in aggregate, engaging in some way with most of the impoverished people who, by dint of their behavioral health problems, account for a vastly disproportionate share of Medicaid costs (or will if/when they become covered by the system).

Of course it is another question as to whether these nonprofits are helping the people they serve come to grips with their mental illnesses and addictions such that their lives improve and health care costs decrease. The data is sketchy, and I'd expect that most of us observing the field would have mixed impressions; at this point, all we can say is that some nonprofits are having this impact, but many others are not.

That said, if human service and behavioral health nonprofits were to become increasingly effective in identifying and engaging with high cost users of our publicly funded health care systems, the prospects for the universal coverage and gradually decreasing costs that inspired the passage of health care reform would grow much brighter. That is the good news. The challenge is that this is a big "if," one that will require fundamental changes in how these nonprofits see themselves and how others see them, in their competencies and capacity for undertaking the work that lies ahead, in who they partner with, and in how they are funded.

I will describe my take on these imperatives in my next post. In the meantime, I'd welcome any questions or feedback about the points I've made in this one.

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