THE "MEDICALIZATION" OF NONPROFITS COULD INCREASE STATES' COSTS

THE “MEDICALIZATION” OF NONPROFITS COULD INCREASE STATES’ COSTS

Volume 28, Issue 493 June 11, 2007

Nonprofit health-care providers—including hospitals, nursing homes and home health organizations—received over $85 billion in Medicaid funding in FY 2004, roughly a third of total Medicaid spending, according to a new report by the Nelson A. Rockefeller Institute.

The groundbreaking study is the most comprehensive effort to date to track the amount of Medicaid dollars going to nonprofit institutions, according to the Aspen Institute, which commissioned the report.

Among other things, the study found that Medicaid dollars are changing the character of certain nonprofits—especially those that focus on “human services” such as counseling. As Medicaid has grown, many of these providers have sought to tap into the program as a funding source—but Medicaid only pays for services that are medically necessary. As a result, providers of human services have sought to involve health-care professionals who can certify that of these services are medically necessary. This “medicalization” or “medicaidization” of services can increase states’ overall Medicaid costs.

For the full report, go to: http://www.rockinst.org/WorkArea/showcontent.aspx?id=11886

Estimates of Medicaid $ Going to Nonprofits, Spending Trends and Industry Trends in FY 2004

Health Sector

Estimate of the amount of Medicaid $ going to nonprofits

Medicaid Spending in This Category

Proliferation of Nonprofits

Hospitals

$42 billion

Stable

Decreasing

Nursing Homes

$11 billion

Slowing

Stable

Mental Health

$5.5-16.9 billion

Volatile

Volatile

Managed Care

$9.4-13.8 billion

Stabilizing soon

Decreasing

Home and Community

$17.5-$20.9 billion

Increasing

Stable

Estimated Total

$ 85-$105 billion

Percentage of Total Revenue from Government in the Form of Contributions, Gifts and Grants, 1997 and 2002

Healthcare Subsector

Government Contributions, Gifts and Grants as a % of Total Revenue 1997 and 2002

1997

2002

All other miscellaneous ambulatory healthcare services

25.6%

41.1%

Outpatient mental health and substance abuse centers

39.0%

35.9%

Residential mental health and substance abuse facilities

39.2%

31.0%

Family planning centers

29.0%

20.7%

Other residential care facilities

28.5%

16.9%

Residential mental retardation facilities

27.0%

15.6%

All other outpatient care centers

15.0%

14.7%

Homes for the elderly

11.8%

9.5%

Psychiatric and substance abuse hospitals, except government

3.9%

4.4%

Home healthcare services

3.9%

3.8%

Freestanding ambulatory surgical and emergency centers

1.7%

1.9%

Nursing care facilities

1.0%

0.9%

General medical and surgical hospitals, except government

0.4%

0.4%

HMO medical centers

0.8%

0.0%
Source: Nelson A. Rockfeller Institute of Government for The Aspen Institute, June 2007

© Copyright 2007, State Health Notes