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Thursday, May 24, 2012

Health Care and Nonprofit Organizations

I have posted previously that I am a believer that a single payer health care system would, or at least could, provide us with the most savings and efficiencies of any other system. I also have gone on record as saying that I believe it should be administered by a nonprofit organization because the nature of the nonprofit lends itself to the objective of minimizing costs. The last time I posted that here I was taken to task by my fellow posters for not understanding that nonprofits do indeed have a profit motive.

I know that taking a position against profit is not popular in a capitalist society and the knee jerk reaction is to defend it since it is the profit motive that drives our economic engines and makes us all get out of bed each morning and go to work (at least the ones of us who DO get out of bed each morning and go to work). There is also a deep rooted fear imbedded in us Americans that it smacks of socialism, or worse (the c word). So our initial reaction is to reject it and then rationalize our rejection, much like if someone criticizes our immediate family member.

 Full disclosure: I am not against profits and unashamedly strive to maximize mine whenever I can and fully understand others doing the same.

Now, a word about my bona fides;  I have served on several boards of nonprofit organizations over the past 25 years and have been providing accounting and IRS compliance services to a number of nonprofits over the past 30 years, including assisting in applying for and acquiring exempt status.  They appear to be happy with my work since they keep coming back. No brag or intent to assume greater knowledge than the reader, if any.  Just showing where I am coming from.  You, assumed reader, may have experience and knowledge superior to my own.  If so, excellent! 

 Nonprofit organizations are a legal invention (unlike organizations that simply don’t make a profit like many of the dot coms of the 90s) and an organization cannot claim to be one without applying to the government and showing to the government that they meet a narrow criteria.  That criteria consist of, for one thing, showing the purpose of the organization, how that purpose fits one of the allowed purposes, and how that organization plans to fulfill that purpose.  Even once it has received its approval it must continue to show that its activities continue to be for the purpose of fulfilling its nonprofit purpose.  In other words, it’s all about the PURPOSE.

 A nonprofit organization enjoys a number of benefits generally not enjoyed by other organizations.  The big one is, of course, they are not generally subject to income taxes, federal or state, and they are exempt from sales taxes (although as in all tax law, there are exceptions to these exemptions, mainly for revenues earned that are not related to the organizations exempt purpose).  These benefits are in exchange for the organization fulfilling a purpose deemed beneficial to society.

A nonprofit organization has no actual owners (although I think the last round it was argued that the public is the owner and I would not disagree with that).  It is run by a board of directors, although in practice, particularly in a small fledgling organization, that board of directors may be the original creator of the organization and, maybe, a couple of friends or family.

Well, I see I have probably already gone over my limit for a single post so I will contine on another post.


  1. If the nonprofit has a government granted monopoly what incentive would they have to keep cost as low as possible?

  2. Of course that is a great question. A HUGE question. Right now we have insurance regulators in all 50 states regulating, or say they say, the insurance industry, including the price of health insurance, in their state. The federal government granted monopoly would need regulators tasked with oversight responsibility of making sure costs are kept to a minimum. There may be some economies of scale in the cost of regulation also by removing it from 50 state's regulation bodies to one regulation body.

  3. I still have concerns. Having responsibility for cost control is not the same as incentive.

  4. I agree. I have concerns also. As I stated, there is no perfect solution. And by that I mean there is no solution we can come up with that's not going to spring a few leaks that will need attention.

    Incentive and responsibility are two different concepts, I grant you, but not necessarily mutually exclusive.

    While I am a great fan of competition as an incentive enforcer, it is my greatest concern that the market incentivizes health insurance companies to exclude large pockets of American citizens from the process. That is unacceptable to me.

  5. It seems like what we are dancing around here is that the present system involves rationing - some people can not pay for healthcare (or insurance).

    Those of us who support an NHS (National Healthcare Service)ought to just admit that the NHS will also involve rationing. There will (later if not sooner) be a board which will decide which procedures the NHS will pay for (and for whom) and how much they will pay for each procedure.

    That is how you will get cost cutting and a reduction in the income of doctors.

  6. Wayne, thanks for the clarification and I agree. Just to be clear, I also support national health care – just not this (the ACA) one.

  7. I would really like to see more nuts and bolts on this national health care plan that uses competition to keep costs down, much like the pre-ACA system, and rations healthcare, much like the pre-ACA system. What is better about it than the pre-ACA one?

    Actually I never considered that the supply of healthcare could be infinite. So, yeah, there would still be rationing. The question is are we going to ration healthcare based on who provides some business with a healthier bottom line, or can we come up with a more humane approach to it? And I speak entirely for myself. I don't believe the amount of money one has is the most humane criteria for rationing healthcare. Any other commodity, OK. But we can't very well blame a person for their own economic condition in life if they don't have their health. If they have their health, then OK..."Get A Job!"

    But I believe that there are a lot of costs that can be cut by changing the system and having non-doctors carry a heavier load of seeing sick people with minor health problems. Having people that now go to the emergency room go to a clinic. And as we baby boomers die out, the reaming people won't have to be on the hook for us any more. That should have a positive effect on costs in the future.

    1. Are you familiar with the proposal made by John Mackey CEO of Whole Foods. http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html