Wednesday, January 27, 2010

Goldwater Institute: Proposal to Limit State Health Contracts to Nonprofits Unnecessary

Report recommends government remain neutral in contract competition

PHOENIX--A proposal being considered at the Arizona Capitol would require that state contracts with companies that provide behavioral health services only be open to nonprofit health providers. But a report released today from the Goldwater Institute shows there is no evidence that nonprofits provide better care and recommends that government remain neutral toward nonprofits and for profits that are competing for government contracts.

Policymakers and community activists pushing this idea are concerned that for profit health care providers won't treat low-income patients, and that the desire to make a profit results in a lower standard of care. "Nonprofits in Health Care: Are They More Efficient and Effective?" by Goldwater Institute economist Byron Schlomach, Ph.D., examines both of these arguments and finds them false.

First, when it comes to state contracts to provide health services, the state sets the standards for who must be treated. So, whether the contract goes to a nonprofit or for profit, the company cannot turn patients away that the government requires them to treat. Second, while there is limited research available on the difference in care between nonprofits and for profits, sophisticated studies show that nonprofit nursing facilities are less efficient than for-profit ones.

Arizona has been down this road before. Until 1996, only nonprofits were allowed to bid on Regional Behavioral Health Authorities contracts (a company that contracts with the state to provide mental health services), but when only one bidder applied in Maricopa County the auditor general recommended allowing for profits to also compete for the contracts. Since then, for profits have met contract obligations just as successfully as nonprofits did before.

"There is no reason for the government to favor nonprofits in health service contracting. The state's role should be to find the health care provider who will provide the best service at the lowest price, whether they are for profit or nonprofit is irrelevant," said Dr. Schlomach.

The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.

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