Three Nonprofit Sneezes in Health Care Reform

Article Highlights:

• Three ways that the nonprofit sector is involved with health care reform debates.
• 1. Overlooked: Nonprofit Employers
• 2. Distorted: the role of nonprofit hospitals
• 3. Misused for Political Reasons: Nonprofit Cooperatives
• The Future of Health Reform

Three ways that the nonprofit sector is involved with health care reform debates.

First, nonprofits are employers, and, like all employers, have a stake in employer incentives for providing health insurance for their employees. Second, the role of nonprofit hospitals is being questioned in the debate, with some asking:

“If nearly everyone will be insured, will hospitals need to provide charity care, and if not, why would they be nonprofit?” And third, what in the world is meant by the much-mentioned” nonprofit cooperatives as alternatives to the public option”?

Rick Cohen explores and answers these compelling questions, noting that according to the old saying, “One sneeze a wish, two sneezes a kiss, three sneezes a disappointment.”

The next time you see people lined up at a free clinic, ask yourself: how many of them tried and failed to get “charity care” at a nonprofit hospital? How many of them are nonprofit employees? How many of them can’t find a nonprofit health co-op that will let them join?

At long last, the nonprofit sector is now an element in the national health insurance debate. What is decided about nonprofits and health care will affect millions of nonprofit patients, staff, and organizations. We need to pay attention.

1. Overlooked: Nonprofit Employers

Achoo! Will nonprofits benefit from the incentives for small (for-profit) employers contained in the health care bills in the House and Senate? Our take: Probably, but minimally. Many small nonprofits will continue to face health insurance provision challenges long after legislation hits President Obama’s desk.

The notion that nonprofits are also employers came as something of a surprise to the White House’s Council of Economic Advisors. Like their for-profit small and large counterparts, most nonprofits are hard-pressed to provide and afford health care coverage for their employees.

And how many nonprofit employers are there? How many are small? The chart below is from the 2008 Medical Expenditure Review Panel Survey of the Department of Health and Human Services, using a count of 534,554 nonprofits.

But when the White House first came up with the idea of tax write-offs , the fact that nonprofits don’t have taxable income against which to use tax credits was a new thought to the CEA.  However, with advocacy from some national nonprofit associations including the National Council of Nonprofits and Independent Sector, Senators Kerry, Snowe, Cantwell, Lincoln, and Schumer added an amendment to the Senate health care bill that would give nonprofits some minor incentives to help them continue providing health insurance to their staffs.

On the House side, Minnesota Congresswoman Betty McCollum (joined by 43 other House members) has advocated adding to the House bill a subsidy for small nonprofit employers — the equivalent concept to a tax write-off.  The language in the House bill doesn’t do much for nonprofit employers, so I suspect that the Kerry amendment, now incorporated in Section 1421 of the Senate bill, will win out, but there are still problems.

For example, most nonprofit employers will not be eligible for the support, because their wages are too high! The restrictive criteria on eligibility are based on paying low average wages, and nonprofits typically pay higher wages compared to for-profit employers of the same sizes. Even for those eligible, the Senate bill gives nonprofits a lower comparable subsidy than offered to for-profit small businesses.

Nonprofit employers have made it into the health reform picture, but as an afterthought.  There’s a long way to go before Congress and the White House show that they realize the nonprofit sector is a huge employer of people with paychecks. . .not only people volunteering.

2. Distorted: the role of nonprofit hospitals

Gesundheit! Will national health reform affect what nonprofit hospitals do as part of their public or community benefit responsibilities?

One of the key differences between for-profit and nonprofit hospitals is that nonprofits are required to provide charity care. The big question for nonprofit hospitals comes from Larry Singer of Loyola University: “If we have 95% or more of the American public with health insurance after reform, what do hospitals do to justify their tax-exempt status?” Or, more fundamentally, what’s the distinction between a for-profit and a nonprofit hospital when — because of national health insurance reform — charity care is no longer needed?

Nonprofit hospitals as a group have hurt their cause  because as committee hearings have revealed, many nonprofit hospitals have been acting just the opposite of nonprofit-like, such as charging uninsured patients more than insured patients for the same procedures. In addition, some trumpet their charity care, but make it difficult or impossible for patients and the public to access it.

There are dozens of stories showing bad behavior by nonprofit hospitals. For instance, Provena Covenant Medical Center in Illinois was shown to have treated only 302 charity cases out of more than 100,000 admissions in 2002. 

And in Maryland, nonprofit hospitals were found to be billing and collecting on the same bills twice or more, and 46 nonprofit hospitals brought 132,000 lawsuits against low income patients.

But even though many nonprofit hospitals haven’t been doing a good job with charity care, and even though the possibility of near-universal health care might call into question the issue of charity care at all, it’s still obvious to us that charity care will still be needed to help people left out in the cold by health reform.

Give us your tired, your poor… but they can’t get sick

For example, as part of the political calculus to get political support for the bill, the Senate bill denies subsidized coverage and even the purchasing of unsubsidized policies on the bill’s “insurance exchanges” to “illegal immigrants.” That will leave millions of undocumented immigrants (who constitute perhaps 15% of the nation’s tens of millions uninsured) without coverage, thereby needing care from nonprofit hospitals, community health clinics, and free clinics. 

Even legal immigrants will have limited access under the Senate bill, which imposes a 5-year waiting period before legal noncitizens can get federally subsidized insurance.  The nation’s anti-immigrant attitudes persist even through health reform.

So if nonprofit hospitals do not rise to the post-reform challenge, they might find themselves facing a public thinking that “some of them can do a lot more, and must be held accountable.”  In other words: even if nonprofit hospitals haven’t been acting very nonprofit-like, they’d better start if they want to keep their nonprofit status. Charity care will still be desperately needed.

3. Misused for Political Reasons: Nonprofit Cooperatives

Bless you! What is a “nonprofit co-op” and how is the idea being misused? We think it’s being discussed more to make the bill more palatable to fence-sitters than because it’s a functional idea.

There are all kinds of useful cooperatives around us; in fact, housing co-ops, agricultural co-ops, rural electric co-ops, worker co-ops, and others, adding up to maybe 30,000 organizations, though only about 1,300 are listed as nonprofit and less than 20 as involved in the provision of health care. Actually, thousands of nonprofit health cooperatives were created in the New Deal era, only to go under when the government funding for them collapsed. 

Senator Kent Conrad (D-ND) has said that some $6 billion will be needed to capitalize a network of new nonprofit health co-ops that have been incorporated into the bill, but critics suggest that small, new health cooperatives might not survive any better than their New Deal predecessors, once the federal subsidy is gone.

Ever notice how difficult it was to find many specifics about what members of the Senate Finance Committee actually meant by their nonprofit co-op proposal?

As evidence that the idea isn’t being discussed on its own merits, Senator Conrad, who hatched the idea, commented, “The reason I was asked to advance an alternative was it was close at the time… there were not the votes for a public option [s]o I was asked to come up with something that would be a not for profit competitor that was not government run.”

Perhaps more importantly than its political origins is the small-but-dismal track record of nonprofit health co-ops to date. Of the nonprofit health co-ops, the poster child is the Group Health Cooperative of Puget Sound (Washington), established in 1947 by farmers and loggers, but functioning more as an HMO with a network of salaried Group Health doctors working in a network of 26 medical centers serving some 570,000 members. Despite the success of this group, both of Washington’s senators believe that co-ops can’t substitute for a public option.

Will the “nonprofit co-op” idea survive the legislation and contribute to the health care solution the nation needs? Our take: Maybe. But the public option is certainly the better choice.

The Future of Health Reform

If there’s anyone that can really explain how the byzantine national health care reform legislation will really work, much less what amendments might get added and subtracted during the next month’s debate, good luck to them.  One thing we know is that the term “nonprofit” has been ignored, rediscovered, used, misused, contorted, and manipulated. And the nonprofit sector isn’t weighing in as much as we need to.

But there is one nonprofit dimension of health care reform that we can predict with reasonable certainty. Media stunts like the $1.2 million that Keith Olberman helped raise  to support one-day clinics in Houston, New Orleans, and Kansas City won’t be enough. 

There will be plenty of post-reform work for the 1,200 nonprofit free clinics that have been caulking this country’s health care services for the indigent for many years to come.

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