Floyd Nease: Vermont’s nonprofits get short shrift from the state - vtdigger.org

This commentary is by Floyd Nease of Jericho, a former Democratic majority leader in the Vermont House, passing his retirement doing consulting and tying flies.

The recent headline in VTDigger was no surprise: “UVM Health Network requests double-digit rate increase, citing inflation and pandemic pressures.” The article went on to say that other hospitals in Vermont will be making the same demands, for the same reasons.

Last week the Burlington Free Press headline was: “UVM Health wants more insurer money.”

Do they need a double-digit increase? Probably. Will they get it? No doubt they will get some kind of increase, as they have in nearly every year in recent history. After all, hospitals are important to the well-being of Vermonters. Without hospitals, there would be no access to high-level health care.

Inflation is real, as are pressures arising from the ongoing pandemic. Behind these headlines is the quiet fact that, even as hospitals have been demanding, and receiving, double-digit increases over the years, Vermont’s nonprofit sector — which does vital, lifesaving work on behalf of the state in child protection, substance misuse prevention, recovery services, and all manner of prevention and early intervention services — has been on a starvation diet for decades.

Unlike hospitals and health care systems, however, there is no quasi-judicial Green Mountain Care Board where nonprofits can make their case and, based on the evidence, receive very justified double-digit increases.

That’s not the worst of it. Many Vermont nonprofits that contract with the state to provide services vital to Vermonters have not seen increases for over a decade. According to the Bureau of Labor Statistics, in those 10 years, the average inflation rate was 2.44% per year, producing a cumulative price increase of 27.31%. Today's prices are 1.27 times higher than average prices in 2012. Wages have increased accordingly; costs of benefits have skyrocketed.

For nonprofits, it means they continue to provide these vital services, but at a loss, and are forced to make up the difference through fundraising via philanthropy, which is unsustainable and unfair to both nonprofits and philanthropists.

According to Common Good Vermont, “more than 6,287 Vermont nonprofits serve all corners of the state, generating nearly $6 billion. Vermont nonprofits paid nearly $2 billion in wages, which translates into an estimated $34 million of personal income tax revenue for Vermont’s state and local governments and over $334 million in federal tax revenues. Nonprofits employ 1 in 7 Vermont workers, making the nonprofit sector the largest industry in the state after the government. Vermont nonprofits contribute $5.7 billion per year to the economy through wages paid, retail and wholesale purchases, and professional service contracts. This contribution is equivalent to nearly 20% of the state’s gross state product — greater than the manufacturing and construction industries combined” (my emphasis).

You might well ask, why do those nonprofits continue to sign contracts with the state if the contracts don’t even meet what it costs to provide those services? The state’s motivation is clear. Contracted services are much lower cost than if the state were to provide them directly. Further, some services provided by nonprofits would constitute a conflict of interest for the state.

For example, In child welfare, Vermont’s Parent/Child Centers often visit families who are being scrutinized by the state or have good reason to be suspicious of the state. Parent/Child Centers serve as a neutral third party whose role is to support that family as they improve their independent parenting skills.

Why nonprofits continue to contract with the state is less obvious. They operate at a loss because they are close enough to their communities to know what services are mission-critical for the Vermonters they serve. If the choice is to house homeless adolescents and treat them for substance misuse at a loss or not serve them at all, Vermont’s mission-driven nonprofits will continue to sign losing contracts.

But the point is, they shouldn’t have to.

How do nonprofits get funding increases? They petition the Legislature. Usually, their needs are considered at the very end of a legislative session, long after hospitals, highway contractors and ski areas have received increases.

Usually, House and Senate Appropriations Committees are in an impossible position and find themselves having to choose between one set of Vermonters and another. (This year: Do we give mental health providers a bump and hope to be able to do the same for parent child centers next year?)

If the Green Mountain Care Board, OneCare Vermont and the Legislature were truly serious about decreasing hospital and high-end social intervention costs, they would invest much more heavily in the evidence-based and -informed prevention and early intervention services provided at the community level by Vermont’s nonprofits.

They know this. They have been presented with compelling science that establishes the efficacy of these services in preventing the very problems that require high-cost hospital and social interventions: heart disease, obesity, child abuse and neglect, mental health crises, crime, et. al.

Unfortunately, until the needs of nonprofits are seen as equal to — and sometimes greater than — the needs of hospital systems, the cycle will continue and there will be no end in sight to health care cost inflation.

The solution? Force Vermont to pay what it costs to provide services. More on this in a future commentary.