Three Nonprofit Sneezes in Health Care Reform

Unexpectedly, there are three large and distinct ways that the nonprofit sector is involved with the 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.

Blue Avocado columnist Rick Cohen appears in every other issue. The former Executive Director of the National Committee for Responsive Philanthropy, he is National Correspondent for Nonprofit Quarterly. He makes a funny sound when he sneezes.

Comments (10)

  • ".. nonprofits typically pay higher wages compared to for-profit employers of the same sizes" This came as a surprise to me, It would be good to share where these numbers are pulled from.

    Dec 03, 2009
  • Dear AK Andrew: This always struck me as a surprise too. If you look at the compensation studies produced by the Bureau of Labor Statistics, while there are plenty of job categories in which for-profits pay higher wages, what seems to stand out is the nonprofits typically eschew paying the very low wages offered by many for-profit small businesses. First, take a look at this chart from the Bureau of Labor Statistics, regarding the nonprofit findings from the National Compensation Study (http://www.bls.gov/opub/cwc/cm20081022ar01p1.htm), which shows that the average hourly wages of full-time workers in 2007 was $21.68 compared to $20.46 for private sector workers, what the BLS would refer to as a "slightly positive wage differential" for the nonprofit sector. Of course, comparisons of a number of specific job titles favor for-profits rather than nonprofits, the largest being the difference in hourly wages between nonprofit managers ($34.24/hr.) and for-profit managers ($41.86/hr.) and nonprofit legal workers ($33.53) versus private for-profit ($40.56). Note however that office and administrative were almost equal: $15.46/hr. for nonprofit, $15.53 for for-profit employees. But to dig deeper, I've made a request of the BLS on behalf of the Avocado to run the National Compensation Study statistics in a more clearly comparable manner, and I'll report back to you and Avocado readers once the BLS gives me the information I've asked for.

    Dec 28, 2009
  • Depending on their location, for profit hospitals provide a lot of charity care too.
    A non profit hospital's charity care is not the only community benefit that justifies its tax exempt status. Many hospitals, like aforementioned Provena Covenant, subsidize ambulance services, crisis pregnancy centers, etc. These services should justify tax exempt status.
    And doesn't the organizational structure of a non-profit hospital count for something? Nonprofit hospitals are not beholden to shareholders, but put all of their excess cash into operations. Because of their world class facilities and treatment abilities, nonprofit hospitals attract patients, from all over the world, and the best and brightest physicians, too.

    Dec 02, 2009
  • Dear Northwest: All true, but there have been plenty of nonprofit hospitals that have operated with an excess of public relations about their service to communities and a paucity of actual results. The hearings held by the Senate Finance Committee were quite revealing, and often the nonprofit structure involved in the hospitals in question was difficult to discern. I used to work in Jersey City, where the nonprofit hospitals were able to not do a lot of things because they could shift those responsibilities off to the local public hospital (Jersey City Medical Center). The proximity of a public or municipal or county hospital is often an important factor in the charitable and community benefit behavior of nonprofit hospitals. One of the problems in national health reform is that it's mostly about health insurance reform and not as much about health reform per se. With both houses having passed legislation, we're in the home stretch toward a new system.

    Dec 28, 2009
  • I am a director of a small non-profit and I am having a difficult time paying the ever increasing premiums our health insurance company is asking for. The reform legislation does not address this issue which will leave us no true alternative. Congress would better serve us by covering more people under Medicare incrementally until all are covered. The public option in the current bill does not go far enough and does not reign in costs. They should scrap the mess they created and start over.

    Dec 09, 2009
  • Dear Northwest: I was personally thrilled to see the proposal that would have extended Medicare to people aged 55 and older, taking advantage of an existing system and governmental infrastructure. And I was personally distraught that the Democrats pulled that off the table in response to the demands of the Senator from Aetna. They aren't going to scrap this bill. What we will face in 2010, when the conference committee presents the President with a bill that will get his signature, is a series of regulatory battles that will look and feel a lot like ad seriatim legislative issues addressing specific elements of health insurance reform. The task for nonprofits--and small nonprofits like yours--will be to keep a close eye on all of the issues that will affect nonprofit employers. Nonprofits will have to work with their state associations and the National Council of Nonprofits to advocate for the nonprofit employers' stake in national health insurance reform.

    Dec 28, 2009
  • Dear Anonymous: Thanks for the cite.

    Dec 28, 2009
  • i wonder if there are stats to prove my suspicion that small nonprofits are more likely to have higher health insurance bills than other businesses because we are small businesses that form very small groups, and we tend more than other businesses to hire people who have disabilities or chronic health conditions as well as lots of women of childbearing age (anything form 18-45) who get disproportionate health insurance rates.
    I am staff to one nonprofit, on board of 3; health insurance is killing our budgets and we are likely to drop it, becoming the sort of employer we don't want to be.
    while i'd like much more serious health reform, short term i'd really like immediate ability to form buying collaboratives to increase the underwriting pool to a decent number of people, and I don't see why that's been made so difficult.

    Dec 22, 2009
  • Dear Northwest: Of course, like most statistics on the nonprofit sector, data on small nonprofits' health insurance bills just don't exist in any kind of comprehensive way. Here's what I wrote about small nonprofit employers' health insurance costs and coverage on September 30th in my "Whither Health Care Reform" article for the Cohen Report at Nonprofit Quarterly (http://www.nonprofitquarterly.org/cohenreport/2009/09/30/whither-health-...):

    The Cost and Coverage Challenges Facing Small Nonprofit Employers
    Why do so many small employers—and increasing numbers of them—not offer health insurance coverage? No surprise, two-thirds of Kaiser survey respondents say it is the soaring cost of health insurance. Nonprofit employers suffering from constrained charitable and government revenues during a deepening recession are no less cost-challenged in providing benefits, and again, remember that the vast majority of nonprofits are small employers:
    * Less than three-fourths of executives of Illinois arts agencies surveyed in 2005 reported having access to a health insurance plan, though some one-fourth reported that those plans had no value for in their total compensation, presumably meaning that the employers did not contribute to the plans.
    * Only 58.1 percent of nonprofits surveyed in 2006 surveyed by the Idaho Nonprofit Development Center offered health insurance to their full-time employees.
    * A Boston Foundation study of Massachusetts nonprofits published in 2009 found only a little over half of nonprofits with budgets of less than $250,000 offered employees health benefits, and they reported paying 20 percent more for single coverage and 22 percent more for family coverage compared to larger nonprofit institutions.

    Only 46 percent of the small nonprofits (less than $500,000, apparently budget size) responding to the regular ”soundings” of the Johns Hopkins University Listening Post Project offered health benefits to their employees according to a September 2009 report. Just about all surveyed nonprofits that provided health coverage reported problems with cost. For one-third of the responding nonprofits, insurance costs appear to be rising twice as fast as the national average for all employers...

    No one should be surprised, then, by the concerns of Listening Post Project survey respondents that they will have to reduce or drop health coverage or shift to part-time (uncovered) workers or, because of increasing insurance costs, limit other wages and benefits paid to employees. The proportion of nonprofit respondents offering no health insurance increased by 62 percent from the Listening Post Project’s 2004 health benefits survey. And those nonprofits continuing to provide health insurance reported passing along escalating health insurance costs to their employees: 46 percent of organizations reported increasing their employees’ share of drug costs in the previous year, 42 percent reported increasing their employees’ insurance premiums; and 41 percent reported increasing their employees’ share of medical services.

    Dec 28, 2009

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